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Thursday, October 7, 2021

A study on Consumer Price Index , Dearness Allowance to Central Government employees & Impact on Covid, inflation on Central Government employees

 

Comrade,

                     Now it is time for 2021 index in consultation with stake holders including Central Government Employees Association, Trade unions, Bank Employees union etc.    .   The higher inflation above 4 %  has adversely affected the common man and the Central Government Employees even though DA is released for Government employees and Pensioners but it is not fully compensated due to higher inflation levels and the DA is released after six months of price rise , these six months we are not compensated for the price rise. For example if the consumer price index rises in Jan 2021 , we get paid in October 2021 as the increase in consumer price index from Jan to June is approved by union Cabinet in September, even there is an decimal is left over example if DA is increased by 2.95% , then we get only 2% DA against the price rise of 2.95% as these 0.95 will be carried over to next time . But whereas in Banks even the decimal is taken into account. So an average loss for the Central Government Employees and Pensioners is about Rs 5000 in a year due to rounding of DA to lower levels rather than higher levels.                           

                The Covid situation has resulted in higher inflation in the year 2020 especially during the period  due to various factors like shut down of industrial units due to lockdown , which has resulted in the gap between demand and supply which is the one of the causes of higher inflation, the second aspect is that food production has also gone down excess rains, lockdown, the gap between demand and supply  etc.

            In the year 2021 the higher inflation is due to rise in prices of petroleum products and higher taxation by both Central Government and State Governments  on Petrol and Diesel. This has resulted in higher inflation.   This paper has been prepared to study the impact of new consumer price index on Government employees and the need for new consumer price index 2021.

           The inflation rate along with the inflation in the food basket is at as per data released by the Ministry of Statistics & Programme Implementation (MoSPI) website  . http://mospi.nic.in/

The details are taken from the labour bureau website:   http://labourbureau.gov.in the comparison has been made for let us study five years data available with us.

 

 

Month

Retail Inflation %

Consumer Food Price Index (CFPI) in %

June 2016

4.20

The inflation in the food basket is at 3.32

June 2017

2.18

The inflation in the food basket is at -1.05

June 2018

5.00

The inflation in the food basket is at 2.91

June 2019

6.09

The inflation in the food basket is at 7.87

October 2019

4.62

The inflation in the food basket is at 7.89

December 2019

7.35

The inflation in the food basket is at 14.12

July 2020

6.93

The inflation in the food basket is at 9.82

November 2020

6.93

The inflation in the food basket is at  9.5

December 2020

4.59

Food inflation declined to 3.41

January  2021

4.06

Food inflation declined to 1.89

Feb 2021

5.03

Food inflation declined to 3.87

March 2021

5.52

Food inflation declined to 4.87

April 2021

4.29

Food inflation declined to 2.02

May 2021

6.30

Food inflation is at 5.01

June 2021

6.26

Food inflation is at  5.15

July 2021

5.59

Food inflation is at  3.96

August 2021

5.30

Food inflation is at  3.11

  

Let us study the All India year-on-year inflation rates (%) for August 2021 (Base: 2012=100)

http://mospi.nic.in/sites/default/files/press_release/CPI_PR_13sep21.pdf

 

Description

Aug. 20 Index

Aug. 21 Index

Inflation Rate (%)

Food and beverages

158.0

164.0

3.80

Pan, tobacco and intoxicants

184.4

191.7

3.96

Clothing and footwear

152.0

162.4

6.84

Housing

156.3

162.4

3.90

Fuel and light

142.9

161.4

12.95

Miscellaneous

150.0

159.6

6.40

Items in Miscellaneous

 

 

 

Household goods and services

148.7

156.8

5.45

Health

155.6

167.7

7.78

Transport and communication

139.6

153.9

10.24

Recreation and amusement

146.6

156.1

6.48

Education

157.5

163.5

3.81

Personal care and effects

158.4

160.0

1.01

 

 

 

 

 

 

 

 

Comparison of one year increase August 2019 – August 2020

Groups

Aug, 2019

Aug,

2020

Increase in points

Weightage 2001

Increase in % as per 2001 index

Weightage

2016

Increase in % as per 2016 index

Food Group

330

352

22

46.2

10.16

39.2

8.62

Education,   health Pan, Supari, Tobacco & Intoxicants

391

408

17

23.3

3.96

30.3

5.15

Fuel & Light

282

299

17

6.6

1.12

6.1

1.03

Housing

434

465

31

15.3

4.74

16.9

5.24

Clothing. Bedding & Footwear

226

230

04

6.4

0.256

5.5

0.22

Miscellaneous Group

254

260

06

2.3

0.138

2.1

0.125

General Index

320

338

 

100

20.374

100

20.385


The price rise in 2019-20  year is not only increasing in food with 22 points , but also in housing which has shown price rise of 31 points,  both Miscellaneous and fuel increased by 17 points . So we cannot say that food basket alone will contribute to higher Consumer Price Index

The reduction in food basket is taking place in 1982 it was 57%, it was reduced to 46.2% in 2001 and now in 2016 it is 39.17%, The increase in miscellaneous basket is taking place in 1982 it was 16.36 %, it was increased to 23.26 % in 2001 and now in 2016 it is 30.3 % The housing allocation has increased from 15.3 to 16.9 this is good move in a long run may be 2020 -21 we are not seeing enough increase.  The decrease in Fuel and light   from 6.43 % to 5.5 % has affected us.  

We can notice in the year 2020 the inflation rate is much higher than the year 2019 , especially the inflation in the food basket. However we can notice in  that in last five years the inflation in the food basket is less than the inflation rate & also we can notice that in Dec 2020 to August 2021 the food inflation has decreased compared to 2019-20 levels, so we should not allocate more percentage on food basket ,  as  the vegetable prices varies from one place to another and on a monthly basis / seasonal basis it changes so it is difficult to predict the impact of food prices on DA for example the prices of the onion/ tomato/ potato will be varying from Rs 10 per kg to Rs 100 per kg in a year. The prices of food articles such as rice, wheat , pulses are steady increase. The other food articles such as oil etc rise and fall depending upon the production. Expenditure on food consumption by industrial workers has fallen significantly in 15 years from 45% to 36% with corresponding increase on non-food items,

The Union government has changed the base year for the consumer price index for industrial workers (CPI-IW), which will affect the minimum wage of private sector workers and Dearness allowance (DA) of government employees without consulting the trade unions. The CPI-IW (2016=100) series replaces the CPI-IW (2001=100) series. As per the recommendations of the International Labour Organization (ILO), Index Review Committee (IRC) and National Statistical Commission (NSC), the base year of price index numbers should be revised at frequent intervals, generally not exceeding 10 years to reflect the changes that take place in the consumption pattern of consumers. Earlier to this revision, the series were also revised from the year 1944 to 1949; 1949 to 1960; 1960 to 1982 and 1982 to 2001 since inception of Labour Bureau.

All India index for the month of September, 2020 stands at the level of 118 and linking factor for the conversion of new series index to previous series on base 2001=100 is 2.88. (AICPIN for month September 2001-100 based is 340) The CPI-IW (2016=100) series replaces the CPI-IW (2001=100) series. 

The life style of the people has changed considerably in past two decades, the purchasing priority has changed from food and other items as television, mobile, transport, entrainment, health etc.     But the trade unions were never consulted by the Government at any stage in either the in 2001 and 2016 index formation.

The number of centres are also increased from 78 to 88 centres. The number of States/UTs has increased to 28 under 2016 series as against 25 in the 2001 series. The sample size was increased from 41,040 families to 48,384, and the number of selected markets for collecting retail price data from 289 to 317. The number of items directly retained in the index basket has increased to 463 items as against 392 items in the 2001 series. This may dilute the effect of raise in prices in in a  particular item.

 

So we should increase the allocation on Household goods and services, Fuel and light  Clothing and footwear, Health, Transport and communication rather than only concentrating on food. 


The Covid has affected the entire world which had resulted in economic fallout , India has also been affected which has resulted in economic impact on the working class , poor people , Government employees were also affected by it , which has impacted the life of the working class , poor people ,  as many industrial units were shut down , business was its lowest this has pushed up the inflation levels. 

The higher inflation above 4 %  has adversely affected the common man and the Central Government Employees even though DA/DR  is released for Government employees and Pensioners but it is not fully compensated due to higher inflation levels and the DA / DR  is released after six months of price rise , these six months we are not compensated for the price rise   .  

The prices are calculated as per Government rates, not on prevailing market rates, net difference of price rise about 30 % which is always we are denied right from 1960 to till date .

The overall the Government employees and pensioners are affected due to price rise and higher inflation as they are not fully compensated against this. The CPI-IW (2016=100) series replaces the CPI-IW (2001=100) series. This revision has taken place after 15 years.  The consumer price index weightage should be re indexed every 5  years (five years ) so that the employees and pensioners will get proper DA / DR the last index has taken place in the year 2016 . Proper linking factor should also be provided.  Now it is time for 2021 index in consultation with stake holders including Central Government Employees Association, Trade unions, Bank Employees union etc.    .   

                

                                                                                      Comradely yours

                                                                                         (P.S.Prasad)

                                                                                     Working President