Price index reveals more disposable income in hands of workers over last 15 years
Shift in consumption patterns
According to a report by ET, in a reflection of a significant shift in consumption pattern among industrial workers, the revised consumer price index for industrial workers (CPI-IW) with 2016 as base year has shown a dip in food expense from 46% to 39%. However, expense on housing has gone up from 15.2% in 2001 to 16.87% now while expenses on miscellaneous items including health and education is also up from 23% to 30%, as per the revised index launched by the Labour Bureau on Thursday.
The revised index has also considerably raised the number of commodities under consideration, widened the coverage from 78 industrial centres at present to 88 in the new series and has shifted the calculation of the index from arithmetic means to geometric means to take into account extreme variations, if any.
Increasing disposable income
“The change in the consumption basket is a clear reflection of the growing economy and more disposable income in the hands of the workers over the last 15 year,” labour secretary Apurva Chandra said. “The index, which is used to calculate the dearness allowance for government employees, nor revised will assure government employees that future calculation of DA will reflect the current reality of consumption,” Chandra added.
However, the change in base year of the index will impact DA calculations only in July next year as the government has freezed biannual hike in dearness allowances since January this year to offset the financial implications on the exchequer during the coronavirus pandemic. Government had in January announced a hike in dearness allowance (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.