Govt revises CPI-AL/RL base year to 2019 after over three decades

Business Standard

7 hours ago

In a bid to better reflect the state of inflation experienced by the rural population, the Labour Bureau has revised the base year for the Consumer Price Index for Agricultural and Rural Labourers (CPI-AL/RL) to 2019 from the existing 1986-87.
The use of 1986-87 as the base year for the two indices was made effective nearly three decades ago, in November 1995.
'The revised series has significantly enhanced the scope and coverage and incorporated many methodological changes in order to make the indices more robust,' said the Labour Bureau in a statement.
The two indices are used to determine minimum wages for agricultural and rural labourers—engaged in either agricultural or non-agricultural work—by both the central and state governments. Additionally, the CPI-AL is used to determine wages under the government's flagship rural jobs programme, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).
The revised series now covers 34 states and union territories (UTs), up from 20 states in the old series, with prices collected from 787 sample villages compared to 600 villages earlier. It also includes 150–200 items, up from 65–106 items in the previous series. The new series uses consumption pattern data from the 68th round of the Household Consumption Expenditure Survey (HCES), released in 2011-12.
Due to the use of updated expenditure data, the weightage of food items has now declined by nearly 10 percentage points for both agricultural and rural labourers.
In the new series, the share of food items for agricultural labourers stands at 57.8 per cent, down from 69.2 per cent earlier. Similarly, for rural labourers, the share has declined to 56.6 per cent from 66.7 per cent in the existing series.
Among major changes in food items, the weightage of cereals and their products has fallen to 12.9 per cent for agricultural labourers and 12.07 per cent for rural labourers, from 40.9 per cent and 38.15 per cent respectively.
Meanwhile, the share of protein-rich items like meat and fish has risen to 5.87 per cent for agricultural labourers and 5.52 per cent for rural labourers, up from 3.1 per cent and 3.3 per cent respectively.
In non-food items, the share of health has risen to 6.19 per cent for agricultural labourers and 6.24 per cent for rural labourers, from 4.38 per cent and 4.23 per cent respectively.
Arun Kumar, former professor at Jawaharlal Nehru University, said the two indices are crucial because the general headline retail inflation figure does not accurately represent a large segment of the rural population, given their distinct consumption patterns.
'Low-income people, especially in rural areas, spend most of their earnings on food, which is very different from the way people in urban areas or with higher incomes spend. The new index to compute inflation as experienced by these sections of the population is much needed. It's a welcome move that the government has changed the base year,' he added.
The inflation rate for the month of June—the first such data in the new series—stood at 1.42 per cent for agricultural labourers and 1.73 per cent for rural labourers.