Railway
The Consumer Price Index for Industrial Workers (CPI-IW) is mainly used for calculating:
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Answer: Option D — Dearness Allowance
Detailed Solution
The Consumer Price Index for Industrial Workers (CPI-IW) measures changes in the retail prices of a fixed basket of goods and services consumed by industrial workers' families. It is compiled and released every month by the Labour Bureau, Shimla, an office under the Ministry of Labour and Employment.
The main use of the CPI-IW is to calculate the Dearness Allowance (DA) for employees of the Central and state governments, public sector undertakings and many other organisations. DA is a cost-of-living adjustment paid to employees and pensioners (as Dearness Relief) to make up for the effect of inflation on their salaries. When prices rise, the CPI-IW goes up, and DA is revised, usually twice a year (from 1 January and 1 July). It is also used to fix and revise minimum wages in scheduled employments and to adjust wages in many industries.
The current series of the CPI-IW has a base year of 2016 (= 100), introduced in October 2020, replacing the earlier base of 2001. It covers 88 industrial centres across India.
India has several consumer price indices:
CPI (Rural), CPI (Urban) and CPI (Combined): compiled by the National Statistics Office (NSO), MoSPI. CPI (Combined) is used by the RBI to measure retail inflation and set monetary policy.
CPI-IW (Industrial Workers): Labour Bureau, used for DA.
CPI-AL (Agricultural Labourers) and CPI-RL (Rural Labourers): Labour Bureau, used to revise minimum wages for agricultural labourers and wages under schemes such as MGNREGA.
The Wholesale Price Index (WPI), compiled by the Office of the Economic Adviser (DPIIT), measures wholesale price changes.
The GDP deflator is the broadest measure of inflation, covering all goods and services produced in the economy.
Why not the other options?
- ✗The GDP deflator is calculated from nominal and real GDP, not from the CPI-IW.
- ✗The repo rate is set by the RBI's Monetary Policy Committee, which uses CPI (Combined).
- ✗Minimum Support Price is recommended by the Commission for Agricultural Costs and Prices (CACP).
Quick tip
Remember: CPI-IW = Labour Bureau (Shimla), base 2016, used for Dearness Allowance; CPI-AL and CPI-RL = rural wages; CPI (Combined) = NSO, used by the RBI.
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Inflation & Price Indices — Preparation
This question tests your understanding of Inflation & Price Indices, a key topic in the General Knowledge section. The detailed solution above uses a step-by-step approach to show the reasoning, and where available, a shortcut that helps you solve similar questions in under 90 seconds during the actual exam.
This topic covers inflation and deflation, the types and causes of inflation (demand-pull and cost-push), stagflation, the Consumer Price Index (CPI) and Wholesale Price Index (WPI), and the measures used to control inflation. Questions commonly ask which index the RBI uses for its inflation target (CPI combined), who publishes CPI and WPI, and what terms such as stagflation, deflation and disinflation mean. Remember that inflation reduces the purchasing power of money and generally benefits borrowers at the cost of lenders. Practise the inflation and price indices questions below, written in the style of the general awareness sections of exams such as SSC, banking, railways, CUET GAT, MAH CET and CLAT. Each question comes with a detailed explanation that adds related facts, so every question helps you revise more than one point.