Consumer Price Index for Agricultural Labourers and Rural Labourers (CPI(AL) & CPI(RL))

The Consumer Price Index for Agricultural Labourers (CPI-AL) and the Consumer Price Index for Rural Labourers (CPI-RL) are vital statistical measures designed to track changes in the cost of living of India’s rural working population. These indices reflect the impact of price movements on the consumption expenditure of low-income households engaged primarily in agricultural and rural labour. Compiled and released by the Labour Bureau, under the Ministry of Labour and Employment, they play a significant role in wage fixation, policy formulation, and social welfare schemes across rural India.

Historical Background

The origin of rural consumer price indices in India can be traced back to the need for reliable measures to assess inflation’s impact on the economically vulnerable sections of society, particularly agricultural and rural labourers.
The CPI for Agricultural Labourers (CPI-AL) was first introduced in 1966, with 1960–61 as its base year, based on data collected from 20 States. The index was designed to represent agricultural labourers who constituted a major share of the rural workforce.
Later, recognising that rural labourers include not only those engaged in agriculture but also those working in other non-agricultural rural occupations (such as construction, transport, and cottage industries), the CPI for Rural Labourers (CPI-RL) was introduced in 1983, with 1983–84 as the base year.
Both indices were revised to reflect changing consumption patterns and price structures, with the latest base year being 1986–87 = 100. The indices continue to be published monthly by the Labour Bureau from Shimla and Chandigarh.

Coverage and Scope

The CPI-AL and CPI-RL are compiled separately for each of the 20 major States where agricultural and rural labour is predominant. These states together represent almost the entire rural population of India.

• CPI-AL covers households whose principal occupation is agricultural labour.
• CPI-RL represents rural households engaged in both agricultural and non-agricultural occupations.

Together, these indices serve as barometers of rural cost of living and price stability, offering valuable insights into inflationary pressures affecting the poorest segments of society.

Objectives

The main objectives of the CPI-AL and CPI-RL are:

• To measure changes in retail prices affecting the consumption basket of rural working-class families.
• To assess the impact of inflation on the living standards of agricultural and rural labourers.
• To provide a basis for fixation and revision of minimum wages under the Minimum Wages Act, 1948.
• To aid in policy formulation relating to poverty alleviation, rural development, and social security programmes.

Composition and Weight Structure

The consumption baskets for CPI-AL and CPI-RL were developed from the Consumer Expenditure Survey (1983) conducted by the National Sample Survey Office (NSSO). Each basket represents the typical expenditure pattern of the target labour groups.
The indices are constructed from five major groups of consumption expenditure:

The high share of food expenditure underscores the vulnerability of rural labourers to food price fluctuations. The relatively higher weight for miscellaneous goods and services in CPI-RL reflects the inclusion of non-agricultural rural households with more diversified consumption needs.

Data Collection and Methodology

Price data are collected monthly from 600 selected villages across the 20 States, covering both essential goods and services typically consumed by agricultural and rural labour households.
The CPI-AL and CPI-RL are computed using the Laspeyres-type formula, which measures the cost of purchasing a fixed basket of goods and services in the current period relative to the base period.
Index=∑(Pt×W)∑(P0×W)×100Index = \frac{\sum (P_t \times W)}{\sum (P_0 \times W)} \times 100Index=∑(P0​×W)∑(Pt​×W)​×100
where:

• PtP_tPt​ = price in the current period
• P0P_0P0​ = price in the base period
• WWW = weight of the item in the consumption basket

The base year 1986–87 = 100 remains the standard reference, although a base revision is under consideration to reflect more recent consumption trends and expenditure patterns.

Publication and Dissemination

The Labour Bureau publishes the CPI-AL and CPI-RL on a monthly basis, generally in the last week of the following month. The data include:

• State-wise indices for CPI-AL and CPI-RL.
• All-India indices for both categories.
• Month-on-month and year-on-year percentage changes.

These indices are widely used by the Ministry of Rural Development, Ministry of Agriculture, Reserve Bank of India (RBI), and various state governments for planning and analysis.

Distinction Between CPI-AL and CPI-RL

Although both indices are closely related, they differ in coverage and composition.

Role and Significance

The CPI-AL and CPI-RL are among the most critical indices for assessing rural inflation and economic well-being in India. Their applications span several areas:

1. Wage Fixation and Revision:
   • Used to revise minimum wages for agricultural and rural labourers under the Minimum Wages Act, 1948.
   • Also employed in the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) for determining annual wage revisions.
2. Policy Formulation:
   • Assists in designing and evaluating poverty alleviation programmes, rural housing schemes, and food security initiatives.
3. Monitoring Rural Inflation:
   • Provides insights into the price burden on low-income households, supplementing broader indices like CPI (Rural) and CPI (Combined).
4. Academic and Research Use:
   • Economists and research institutions use these indices to analyse real income trends, wage–price relationships, and rural consumption behaviour.

Trends and Behaviour

Over the years, CPI-AL and CPI-RL have exhibited patterns similar to general inflation but with greater volatility due to their high dependence on food prices.

• Periods of drought or poor monsoon often lead to sharp increases in the indices due to rising prices of food grains, pulses, and vegetables.
• Government policies such as food subsidy programmes, buffer stock management, and rural employment schemes help moderate the impact.
• During global commodity price shocks, the indices rise sharply due to increased prices of fuel, edible oils, and other essentials.

Limitations

Despite their long-standing use and relevance, the CPI-AL and CPI-RL have some limitations:

• Outdated base year (1986–87) does not reflect current consumption patterns or new goods and services in rural markets.
• Limited geographical coverage, as indices are prepared only for 20 States.
• Narrow consumption basket, focusing mainly on basic goods with limited inclusion of modern consumer products.
• Lag in publication compared with other indices like CPI (Rural/Urban) compiled by NSO.

The Labour Bureau has initiated efforts to update these indices with a new base year and revised weights based on recent household expenditure surveys.

Relationship with Other Price Indices

While CPI (Rural) and CPI (Combined) compiled by NSO serve as general indicators of rural inflation, the CPI-AL and CPI-RL are occupation-specific indices tailored for rural workers. They are thus narrower in scope but highly relevant for wage and welfare policies.
Their movement often correlates with the Consumer Food Price Index (CFPI), given the large food component in rural expenditure.