After 3 decades, govt revises base year for CPI rural-farm labour

Weighting of food items has now declined by nearly 10 percentage points for both agri and rural labourers

In a bid to better reflect the state of inflation experienced by rural population, the labour bureau has revised the base year for Consumer Price Index for Agricultural and Rural Labourers (CPI-AL/RL) to 2019 from 1986-87 at present. The use of 1986-87 as base year for the two indices was made effective nearly three decades ago in November 1995.

 

The two indices are used for determining minimum wages for agricultural and rural labourers (engaged in either agri or non-agri work) by both central and state governments. Also, the CPI-AL is used to determine wages under the central government’s flagship rural jobs programme — Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

 

Inflation rate for the month of June — first such data in the new series —stood at 1.42 per cent for agricultural labourers and 1.73 per cent for rural labourers.

 

“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 new series covers 34 states/union territories (UTs) as against 20 states in the old series, with prices collected from 787 sample villages as against 600 villages in the old series. Also 150-200 items are now covered as against 65-106 items in the old series. The new series uses consumption pattern data from the 68th round of Household Consumption Expenditure Survey (HCES), which was released in 2011-12. 

 

Owing to the use of updated expenditure data, the weighting 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, which was 69.2 per cent earlier. Similarly, for rural labourers, the share of food items has gone down to 56.6 per cent from 66.7 per cent in the existing series.

 

Among major changes in the food items, the weighting of cereals and its 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 & fish” has risen to 5.87 per cent for agricultural labourers and 5.52 per cent for rural labourers from 3.1 per cent and 3.3 per cent, respectively.

 

On the other hand, in non-food components, the share of health has risen to 61.9 per cent for agricultural labourers and to 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 was much needed. It's a welcome move that the government has changed the base year,” he added.