Context:
After nearly 40 years, the Central Government is planning to revise the base year of the Consumer Price Index for Agricultural Labourers (CPIAL) and Rural Labourers (CPIRL) to better reflect the current inflation faced by these workers. The Labour Bureau has formed an expert committee, chaired by Asit Kumar Sadhu (National Statistical Commission member), to revise the base year from 1986-87 to 2024-25.
Purpose of CPIAL/RL
- The Consumer Price Index for Agricultural Labourers (CPIAL) and Rural Labourers (CPIRL) are essential tools used by both the Central and State Governments to determine minimum wages for agricultural and rural labourers, engaged in either agricultural or non-agricultural work.
- CPIAL is also crucial in setting wages for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), the government’s flagship rural jobs program.
Current Situation
- The Union Government is revising the base year of CPIAL and CPIRL, as they are currently based on the outdated 1986-87 year.
- The new base year will reflect the 2024-25 agricultural year, incorporating the latest economic and consumption data.
- This revision aims to ensure that the indices are more aligned with current consumption patterns and inflationary pressures experienced by rural workers.
Key Updates on the Revision Process
- An expert committee, consisting of representatives from the consumer affairs and statistics ministries, alongside independent experts, has been formed for this task.
- The recently released Household Consumption Expenditure Survey is being utilized for updating the indices.
- The revision also aims to extend the coverage of the indices to all states and Union Territories (UTs), as they are currently available for only 20 states/UTs. States without a dedicated index typically use neighbouring states’ indices for determining minimum wages.
Impact on MGNREGA Wages
- The updated CPIAL will be used for wage calculations under MGNREGA, which are adjusted annually based on changes in CPIAL, typically applied from April 1.
- The wage rate for MGNREGA workers will be more accurately aligned with real inflation data, particularly the inflation faced by low-income rural populations.
Consumption Patterns and Weightings
- Rural workers, especially those involved in agriculture, spend a significant portion of their earnings on food, which is why food-related items have a disproportionate weight in these indices.
- CPIAL currently assigns 72.9% weight to food, and CPIRL assigns 70.4% weight to food.
- Other consumption categories, such as medical care and education, have much lower weightings (around 4.38% for CPIAL in medical care, and 0.94% for education).
Key Considerations
- The base year revision will ensure that these indices more accurately track the inflation faced by low-income rural workers, particularly in relation to food prices.
- This update is also crucial for ensuring that MGNREGA wages and minimum wages are based on relevant and timely data, helping to support the economic stability of rural workers.
The revision of CPIAL and CPIRL indices is a crucial step to align wage determinations with the real cost of living faced by rural and agricultural workers. The update will help ensure that these workers receive fair compensation in line with current inflation trends, particularly in food prices.
