The Union government is set to change the base year for the consumer price index–industrial workers (CPI-IW), paving the way for a possible increase in minimum wage of private sector workers and dearness allowance of government employees.
Union Labour and Employment Minister Santosh Kumar Gangwar is scheduled to release the new CPI-IW index, keeping 2016 as the base year, on October 21, a top labour ministry official said. The CPI-IW hasn’t been revised since 2001 — an exercise which should usually take place every five years.
“The government will also announce that it will revise the CPI-IW base year to 2021 and the work will begin next year. The International Labour Organisation ,” the official said, requesting anonymity.
The move will lead to a hike in salaries of around 30 million industrial workers and 4.8 million central government employees.
This is because the dearness allowance (DA), a component of salary which undergoes revision every six months to keep pace with the inflation rate in the economy, is linked to this inflation index for government employees. For private sector workers, the central government and most states in India increase the variable DA component of the minimum wages twice a year.
The old base for the CPI has become outdated as the consumption patterns of households have changed drastically in the past two decades, the ministry official said. The prices of the basket of certain goods and services are tracked for mapping inflation.
The CPI-IW, with the base year 2016, will give more weight to non-food items than the food ones compared to the 2001 index. The weight for food and beverages components is set to decline from 46 per cent to 39 per cent in the new series. On the other hand, the weight for non-food items such as education, health, entertainment and recreation, household goods and services, transport and communication is slated to jump from 23 per cent in 2001 to 30 per cent in 2016.
As the prices of non-food items rise at higher rate than food items, the DA component of salaries of employees would see higher hike if new CPI-IW is taken into account than the existing one.
To develop the new index, the National Statistical Office conducted a survey of over 48,000 working families, tracking their consumption patterns, during January-December 2016. The new series will cover 28 states and Union Territories against 24 and cover 317 markets compared to 289 used for the 2001 index.
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
RECOMMENDED FOR YOU