The index, with revised base year, is likely to be released next week and will impact inflation as well as dearness allowance calculation for 11 million government employees and pensioners.
According to a government official, the weightage of transport, healthcare and housing has gone up many fold in the new series in the monthly expenditure of an industrial worker, especially consumption of petrol and diesel with the addition of cars.
Besides, the other changes in the index include raising the number of commodities under consideration, widening the coverage from 78 industrial centres at present to 88 in the new series and shifting the index from arithmetic means to geometric means to take into account extreme variations, if any.
“Revising the base year will put more money in the hands of industrial workers and government employees,” the official quoted above said on condition of anonymity.
Thereafter, the base will be revised every five years. “We have started work on the next series with 2021 as base year,” the official added.
However, the change in base year of the index will impact DA calculations only in July next year as the government has frozen biannual hike in dearness allowances since January this year to offset the financial implications on the exchequer during the Covid-19 pandemic. Government had in January announced a hike in DA from 17% to 21% but did not implement it..
The next hike, which was due in July, has been deferred and will now be done in July 2021. The dearness allowance (DA) is a cost of living adjustment allowance paid to government employees, public sector employees (PSEs) and pensioners in India.
The CPI-IW measures change in the prices of goods and services consumed by industrial workers in reference to a base year. The labour bureau, under the ministry of labour and employment, compiles the consumer price index for industrial workers every month on the basis of the retail prices of selected items collected from 289 markets spread over 78 industrially important centres in the country.