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The consumer price index: Why it’s irrelevant

It does not cover the vast majority of workers. For those it does, the CPI fails to reflect the everyday realities of the rise in prices, reports B. KOLAPPAN


For an overwhelming majority of industrial workers, wage raises linked to the consumer price index (CPI) mean nothing. For they are either contract workers or casual labourers who are not covered by awards and wage settlements.

Even those who are supposed to benefit from CPI-related wage hikes complain that the index does not reflect reality as the prices in the retail market are very high.

W.R. Varada Rajan, national secretary of the Centre of Trade Unions (CITU), says: “The price index does not reflect the consumption pattern. It is a manipulated index giving weightage to consumer durables instead of essential items. You cannot include these durables in the consumption basket because no consumer buys these items every quarter of the year.”

Explaining why the index is skewed, he says: “"For example, the consumer price index number for industrial workers gives only 16.85 per cent for housing in Coimbatore. But, a worker will be spending 30 per cent of his salary for housing.”

Report gathering dust

In this regard, Mr. Varada Rajan points out how the Professor Rath Committee (1978)] recommendations on modalities for compiling the consumer price index (CPI) are gathering dust. Though the committee recommended the constitution of State-level standing committees comprising representatives of trade unions, organisations of employers, officials and the labour bureau to meet once to scrutinise the price data and other related questions, it was not implemented.

R. Kuchelar, president, Working People Trade Union Council, agrees that the price index does not factor in actual market prices, He, however, wants to see the whole issue against the backdrop of globalisation, with employers reducing the size of the permanent workforce and replacing it with lesser paid contract labour.

“Their wages are not at all linked to the price index. A decade ago, there were as many as two lakh textile workers in Tamil Nadu. Today, only 30,000 of them are permanent workers and the rest are casual workers who do not even get 10 per cent of the salary of the permanent workers,” he says.

Proliferation of unions

AITUC general secretary S.S. Thiagarajan believes that the proliferation of trade unions is one of the key factors that led to the marginalisation of industrial workers.

“The splits have resulted in trade unions caring only for the interests of permanent workers, ignoring contract workers. These casual contract workers outnumber the permanent workers but the trade unions are not in a position to fight for their cause.”

The situation has come to such a pass that only 3 per cent of the workforce in the organised manufacturing sector is constituted by permanent employees, who get dearness allowance linked to the CPI.

“Two per cent of the permanent workers are in the public sector; the figure is one per cent in the private sector,” says Mr. Varada Rajan, quoting National Sample Survey Organisation figures.

These figures put the size of the workforce in the organised sector at below 7 per cent of the total.

Price control

As a way out, he suggests that essential items should come under price control. “Prevent hoarding and universalise the public distribution system. This will bring down the prices,” says Mr. Varada Rajan.

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