Base-year change of CPI (IW) from 2001 to 2016 –Its Impact ? A writeup by Comrade D.Gopalakrishnan, VP, CHQ, AIBSNLPWA
Base-year change of CPI (IW) from 2001 to
2016 – Impact
Whether it was revised earlier
Yes. After independence it was revised four times
earlier (1949, 1960. 1982 & 2001)
What
is the need for such revision
According
to government sources, the revision is required because the consumption pattern
is changing. Chadha committee (headed by
Prof. G.K.Chadaha) recommended for revision of base year once in 10 years. Now the Govt. has announced that it will be
revised once in 5 years hereafter.
Was
there any consultation with workers’ representatives
·
Govt. appointed a committee called “Technical Advisory
Committee on Statistics of Prices & Cost of Living” with 21 members out of
which only one was from Central TU (BMS).
·
Govt. also constituted
“Standing Tripartite Committee” with 18 members out of which two were from
Central TU (BMS & INTUC)
·
Change in base year has
direct impact on DA & DR mainly on Central/State Govt. employees &
pensioners who account for more than 5 crore and this section of stake-holders
was not consulted
What
is CPI (IW)
·
It is consumer Price Index
for Industrial workers. (Some other
index is available for agricultural workers, rural workers, urban workers etc.)
·
It is one of the prominent economic
indicators which measures the relative changes in retail prices for a fixed set
of goods of services consumed by an average working class family
·
It is mainly used for
determining DA to Central, State Government employees, Industrial workers and
C.G. pensioners including BSNL/MTNL combined service optee pensioners which
covers more than 5 crore
How
CPI (IW) is determined
·
It is based on weighting
diagaram which broadly consists of six items viz. 1) Food & Beverage 2) Pan
3) Fuel & Light 4) Housing 5) Clothing & footware 6) Miscellaneous
(Each item will have sub-groups)
-2-
·
Each item is given certain
percentage and all put together would be 100 percent
·
Miscellaneous includes six
items like 1) Education 2) Health-care 3) Recreation & Entertainment 4)
Household good & services 5) Transport & Communication 6) Personal care
& effect
Base
year Centres Food
Pan Fuel Housing Clothing Misc Total
Covered
1960 50 60.09 4.8 5.8
6.3 8.5 13.7 100
1982 70 57
3.15 6.28 8.67 8.54 16.36
100
2001 78 46.2
2.27 6.43 15.27 6.57
23.26 100
2016 88 39.17
2.07 5.5 16.87 6.08
30.31 100
According
to the above statistics in 15 years (between 2001 & 2016) food consumption
has come down by 7.03%, Fuel by 0.93%, Clothing by 0.49%. Does
it reflect the reality?
·
Though number of families
surveyed increased from 41040 to 48384 it is less than 1% of total working
class families in the centres surveyed – Does it reflect the reality?
·
Asper the survey, one family
member per day consumes less than 200ml of milk. Is it the correct reflection?
·
Only consumption expenses are
taken into account for weighting diagaram but non-consumption expenses like
Incometax & other taxes, Repayment of loan & interest, Insurance
premium etc. are not taken into account
·
The linking factor of 2016
series with 2001 is 2.88. Asper 2001
base year, CPI (IW) was 338 in August 2020 and 340 in September 2020 which is
2% increase in one month. Asper 2016
base year it is 117.4 and 118 respectively (an increase of 0.6 in one
month). This is the real impact.
·
Retail inflation has pegged at
6.69% and food inflation at 9% in August 2020
·
It will have cascading effect
on DA & DR
·
I presume that due to change
in the base-year, DPE did not release the IDA increase from October 2020
Base-year change of CPI (IW) from 2001 to
2016 (Part II)
(D.Gopalakrishnan, CHQ vice-president,
AIBSNLPWA)
How we are
cheated?
Most
of us are worried when there is a delay in releasing the DA/DR order by the
Government. It is but natural. But we do
not understand that how we are cheated in compilation of figures. The Government claims that 100%
neutralization is given to price-rise by granting DA/DR. But the fact is otherwise. According to Department of Economic &
Statistics (GoI), as on 1/4/2014 the price of rice per kg was Rs.52/- whereas
the 7th CPC while compiling the cost for food stated the price of
rice per kg as Rs.25.93 (nearly 50% less than the actual cost). Similarly for housing, 7th CPC
quoted only Rs.524.07. Whether it is
possible to get even a single room for rent with this amount?
Why the Govt.
chose 2016 for base year change?
It
is because “point to point rate of inflation” with base year as 2001 on an
average for 11 months in 2016 was 5.21% (on 8th November 2016 PM
announced demonetization and no percentage was given for the month of December
2016). It was the lowest. Between 2011 and 2015 the inflation rate
ranged between 5.88% and 10.92%.
Inflation
means what?
It
means that the real value of money is reduced.
If you are able to purchase 3 kg of rice for 100 rupees last year, you
can purchase only 2.5 kg this year for the same 100 rupees.
Groupwise
change
Between
2001 & 2016 series out of six groups, points for food, pan, fuel, clothing
was reduced but for housing and miscellaneous it was increased to keep the
constant factor as 100. Does it reflect
the reality? No.
Level
& pattern of consumer expenditure for 2009-2010 (as per NSS report No.538)
Food 44.4%
Pan 1.5%
Fuel
& Light 6.9%
Clothing 5.8%
Housing 5.8%
Miscellaneous 35.6%
Total 100%
-2-
National
Statistical Office (NSO) conducted survey for 2017-2018 but the Govt. on
15/11/2019 withheld its release.
According to some reputed press media, 2017-18 survey revealed the fact
that in real terms (after adjusting for
inflation),
Monthly per capita expenditure (MPCE) dropped by 3.7% (in 2011-12 it was
Rs.1501/- which came down to Rs.1446/- in 2017-18). The Govt. also announced that it may conduct
the survey in 2021 or 2022. Then why
can’t they wait till such time for base-year change?
How
weighting diagram is derived?
It
is on the basis of Working Class Family Income & Expenditure (WCFIE) survey
i.e. the family budget covering consumption expenditure which is conducted by
National Sample Survey Organisation (NSSO) under the Ministry of Statistics
& Implementation. Working class
family means that in a family there should be a manual worker, working in any
of the following 7 sectors viz. 1) factories 2) Mines 3) Plantation 4) Railway
5) Public Motor Transport 6) Electricity General & Distribution & 7)
Port & Dock.
Weighting
diagram is given on the basis of expenditure, the family incurs for each of the
six categories. The constant factor is
100 whether sample survey is conducted in 70 or 78 or 88 centres. Prices of some items are collected on
weekly basis, some items are on monthly basis.
Then these figures are distributed among various states & UT based
on working class population.
We
should also understand that the ‘Worker/population ratio (WPR) in India was
reduced by 3.9% between 2011-12 (38.6%) and 2017-18 (34.7%) according to
2017-18 Annual Report of Ministry of Statistics & Implementation.
Basket of
Goods & Services/Markets/surveyed families
In
2001 series it contained 392 items. In
2016, it is said to be 463 items. Price
is collected from 317 markets from 88 specified centres. In Chennai, price collection was taken from shops
from Ambattur, Perambur, Saidapet, Sembiam, Tiruvottiyur and Washermanpet. In 2001 series there were 78 centres out of
which 13 were dropped and 23 were added in 2016 series. For example in Tamilnadu, Chennai,
Coimbatore, Coonoor, Madurai and Salem were retained in 2016 series; but Trichy
was removed and instead Tirunelveli & Virudhunagar were added. According to statistics, there were 1,08,611
worker families in Virudhunagar but only 648 familes were surveyed which
constitute 0.59%. Totally for Tamilnadu
from the above 7 centres sample survey was conducted from 3240 families.
-3-
No Survey
Before
changing the base-year on earlier occasions, WCFIE (Working Class Family Income
& Expenditure) survey was conducted.
When the base year was changed from 1949 to 1960, survey was conducted
in 50 centres during
1958-59. Similarly when the base-year was changed from
1960 to 1982 survey was conducted in 70 centres during 1981-82; for base-year
change from 1982 to 2001, it was conducted in 78 centres during 1999-2000. All these details are available in the
official website of labour bureau and national statistical office. But now when the base-year change is made
from 2001 to 2016 there is no information available in the official website and
we have to come to the conclusion that there was no survey.
No Data for Linking
Factor
Whenever
there is a change in base-year, groupwise (for all the 6 groups) linking factor
and General Index should be given. It
was done in 1982 and 2001. General Index
was 4.93 in 1982 and hence the linking factor was 4.93 and similarly in 2001
the general index was 4.63 and hence the linking factor was 4.63. But no such information was given for the
linking factor of 2.88 when the base-year is changed from 2001 to 2016.
No
transparency
As
a subscriber to the IMF’s Special Data Dissemination Standard (SDDS), India is
obliged to follow good practices in 4 areas viz. Coverage, Periodicity and
timeliness of Data, Public access to the data & Data integrity and
quality.
But
this government is not following those good practices. The present regime is not allowing its
agencies to function as it was functioning.
The
Government has passed several laws regarding labour recently in the
parliament. But no consultations with
labour representatives. Usually Indian
Labour Conference (ILC) is to be held every year. In this ILC, representatives from the Government,
employers’ organizations and employees organizations participate. But since 2015 no ILC meeting was held.
Conclusion
The
change in base year from 2001 to 2016 will have adverse effect on future DA/DR
to employees & pensioners. But some
newspapers published that there will be increase in salary & DA for Govt.
employees and pensioners. Because of
lack of knowledge some employees/pensioners were misguided by those
reports. It is our responsibility to
educate them with facts.
Change of Base year from 2001 to 2016 for
CPI (IW)
The
Government has announced the change of base year from 2001 to 2016 for
compilation of CPI (IW) on 22/10/2020.
We
urge upon the Government to review the decision because of the following
reasons.
According
to government sources, the revision is required because the consumption pattern
is changing. Chadha committee (headed by
Prof. G.K.Chadha) recommended for revision of base year once in 10 years. ILO guideline also recommends for change once in 10 years. But, now the Govt. has announced that it will
be revised once in 5 years hereafter.
No
proper consultation with stake-holders
·
Govt. appointed a committee
called “Technical Advisory Committee on Statistics of Prices & Cost of
Living” with 21 members out of which only one was from Central TU (BMS).
·
Govt. also constituted
“Standing Tripartite Committee” with 18 members out of which two were from
Central TU (BMS & INTUC)
·
Change in base year has
direct impact on DA & DR mainly on Central/State Govt. employees &
pensioners who account for nearly 5 crore and this section of stake-holders was
not consulted.
Fallacy
in compilation
·
It is one of the prominent
economic indicators which measures the relative changes in retail prices for a
fixed set of goods and services consumed by an average working class family
·
Though number of families
surveyed increased from 41040 to 48384 it is less than 1% of total working
class families in the centres surveyed.
It does not reflect the reality?
·
It is based on weighting
diagaram which broadly consists of six items viz. 1) Food & Beverage 2) Pan
3) Fuel & Light 4) Housing 5) Clothing & footware 6) Miscellaneous
(Each item will have sub-groups)
·
Food item is the main
component among the six groups and whenever the base year is changed points
towards food is getting reduced. In this
change it is reduced by 7.03 points compared to 2001 series whereas the points
pertaining to miscellaneous is increased by 7.05 points. According to government’s statistics in one
year between August 2019 and August
-2-
·
2020 price of food items was
increased by 22 points whereas the miscellaneous items were increased by only 4
points.
·
Asper the survey, one family
member per day consumes less than 200ml of milk. Is it the correct reflection?
·
Only consumption expenses are
taken into account for weighting diagaram but non-consumption expenses like
Incometax & other taxes, Repayment of loan & interest, Insurance
premium etc. are not taken into account
·
The linking factor of 2016
series with 2001 is 2.88 which is unrealistic.
When base year was changed from 1960 to 1982 (gap of 22 years) the
linking factor was 4.93 and again when it was revised from 1982 to 2001 (gap of
19 years) the linking factor was 4.63.
These
unscientific changes shall have cascading effects in future on neutralization
of price increase affecting the DA/DR granted to employees and pensioners. It is requested to review and rescind the
decision. We also request that proper
scientific method may please be adopted in consultation with real stake-holders
like Central/State Government employees and pensioners and pensioners of PSU
who are paid from Central Civil Estimate.
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