People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 27

July 13 , 2008


CITU For Rectification  Of Price Index


M K Pandhe


The meeting of the 'Technical Advisory Committee on Statistics of  Prices and Cost of Living' was held in the office of the Central Statistical Organisation on June 24, 2008 to consider some problems connected with Consumer Price Index for urban and rural areas.


The Consumer Price Index Review Committee known as Rath Committee in 1978 recommended that the representative of the trade unions should be included in this committee. After 30 years, this has been implemented. M K Pandhe who is the only trade union representative of the committee attended this meeting and gave the following write up.


WHEN the trade unions in India unanimously opposed introduction of the New Series of Consumer Price Index with 2001 as the base year, three representatives of the trade unions from BMS, INTUC and CITU were asked by the Technical Advisory Committee on February 17, 2006 to explain the review point of the trade unions. I was representing CITU in the meeting. I  spoke in the meeting at length about the faulty character of the new series and explained how the price collection machinery was defective, which resulted in price index moving slower than the actual rise in prices of essential commodities.


The CITU also pointed out how the Family Budget Studies conducted by the government of India and the Labour Bureau for the 2001 series were manipulated which resulted in getting defective weightages of items consumed by the working class families.




The CITU demanded appointment of a New Index Review Committee on the pattern of Rath Committee so that the entire methodology of working out the Consumer Price Index series for the working class is properly studied and a transparent method of collection of prices should be evolved so that the price index become reliable for the working class.  The representatives of the INTUC and BMS supported the CITU presentation. While concluding the discussion, even the chairman of the meeting agreed with some of the suggestions given by the CITU.  As the official minutes of the meeting stated, “It was stressed that ministry of labour should take suitable steps and consider the suggestions made by Dr Pandhe and other users to further improve the quality of index as and when future revisions is undertaken”.


The reply given by the Labour Bureau was not found satisfactory by the Technical advisory Committee.  The Labour Bureau stated “A Index Review Committee under the chairmanship of Professor  G K Chadha has been constituted to review the various aspects of Consumer Price Index numbers for Industrial workers including methodology for deriving weighting diagram, method of compilation, derivation of linking factor, existing price collection mechanism etc.”  The director general of the Labour Bureau is himself the secretary of the committee.


The members of the committee felt that the Labour Bureau should have taken steps on the proposals given by the CITU in the last committee meeting.  The director general of the Labour Bureau did not attend the meeting of the Technical Advisory Committee. The representatives of the Labour Bureau who attended the meeting cold not give a satisfactory reply to the points raised by the members of the committee.


It was pointed out in the meeting by me that while the market prices are going up very steeply in the country during the last eight years, the Consumer Price Index Numbers with 2001 as the base year increased only by 38 points. The index is thus a gross underestimation of the actual prices prevailing in the market as a result of which workers are defrauded of thousands of crores of rupees every month of their dearness allowance.  Unless the index is properly corrected the workers would lose all faith in the Consumer Price Index numbers.


The Index Review Committee did not include the representative of CITU.  Thought it held six meetings so far it has not invited any representative of trade unions to appear before the committee to explain their apprehensions.  The time limit of the committee has been extended to March 2009 but it has not yet gone into the question of present series of Consumer Price Index.


The meeting then considered the Note on deriving weighting diagrams for CPI (urban) and CPI (rural) while collection of prices some times will require imputations to some other items.  However, CITU noted that the variation of prices of the imputed items should be similar. For example, the prices of petrol and diesel do not move up at the same proportion. Imputation of the item to one another would not correctly reflect the price variation.  However, the representative of Central Statistical Organisation (CSO) noted that the weightage of the item in the total expenditure would be less than one percent and would not much affect the price collection.


The official note suggested that all PDS items should be included in the preparation of weighting diagram. The CITU pointed out that the characterisation of below poverty line (BPL) and above poverty line (APL) has vitiated the entire public distribution system which would naturally pose problem for price collection machinery.  The break up of BPL and APL is also not on realistic position. It was generally felt that BPL and APL differences should not be taken into consideration.





Data collected by National Sample Survey Organisation (NSSO) for Maharashtra showed that only 7 per cent of the families in urban areas reported purchase of wheat from the PDS system, while with regard to rice only 6 per cent of the families surveyed reported purchase of the item from the PDS.  The data also revealed that only 0.12 per cent of the total consumption expenditure showed purchase of wheat and 0.06 per cent of rice from the PDS.  These aspects should be taken into consideration while giving treatment to the prices of PDS items.  Various other suggestions were given by different members to make the data more reliable.


The Technical Advisory Committee further considered the Consumer Price Index for agricultural workers.  At present data is collected by the NSSO while compilation has been done by the Labour Bureau.  The Chief of the NSS noted the poor quality of the index.  Many items mentioned in the original market survey are not available in the market and substitution of every item created problems.  He pointed out the Labour Bureau should conduct a fresh market survey to prepare a proper weightage diagram.  He expressed inability of NSSO to conduct market survey due to shortage of manpower. He further noted that conducting market survey for agricultural workers and also collection of data for the price index cannot be done simultaneously by the NSSO.


The committee generally agreed with the views expressed by the NSSO and desired that  Labour Bureau should take steps to conduct a fresh market survey to make the index more reliable.


At  the conclusion of the meeting it was pointed out that such an important committee which has the task of monitoring the trends in prices should meet more frequently. This meeting of the committee was taking place after a lapse of 28 months. The committee should take note of the unreliability of data stated by various agencies and take steps to periodically review the technical aspects of collection of prices and methodology of index. The chairman agreed to the suggestion that at least two meetings of the committee should be held in a year so that the responsibility given to the committee would be properly fulfilled.


The CITU also raised the question of the Cost of Living Index.  Though the nomenclature of the committee mentions about Cost of Living Index, this index is not being calculated in India at present.  Either the nomenclature of the committee should be changed or the work should be undertaken for preparation of Cost of Living Index.  The chairman did not agree to the proposal to change the name but said the work of compilation of such a index should be undertaken that at a suitable time.


The committee considered the price index compiled by the government of Orissa and pointed out some technical aspects which the representative of the government of Orissa agreed to rectify.