Consumer Price Index for Urban Non Manual Employees (CPI(UNME))

The Consumer Price Index for Urban Non-Manual Employees (CPI(UNME)) is a statistical measure that tracks changes in the retail prices of goods and services consumed by a specific segment of the urban population in India—namely, non-manual employees. It is designed to reflect variations in the cost of living of this particular socio-economic group, which primarily includes salaried individuals employed in offices, educational institutions, and similar non-manual occupations. The index serves as an important indicator for analysing inflation trends and wage adjustments within urban areas.

Background and Purpose

The CPI(UNME) was first introduced in 1960 by the Central Statistical Organisation (CSO), now a part of the National Statistical Office (NSO) under the Ministry of Statistics and Programme Implementation (MoSPI). Its development was aimed at providing a more representative measure of price changes for a specific class of consumers different from industrial workers or agricultural labourers.
This index was particularly relevant for white-collar employees, whose consumption patterns significantly differed from those of industrial or agricultural workers. The CPI(UNME) primarily catered to government employees, teachers, and private sector professionals residing in urban areas.
The index was used for adjusting dearness allowance (DA) for government employees and workers in public sector undertakings. It served as a key reference in wage negotiations, salary revisions, and cost-of-living allowances, making it a significant socio-economic tool in post-independence India.

Construction and Methodology

The CPI(UNME) was based on a fixed basket of goods and services typically consumed by urban non-manual employees. The basket included items related to food, fuel, clothing, housing, medical care, education, transport, and recreation. Prices were collected periodically from selected markets in urban centres across India.
Key elements of its methodology included:

• Base Year: The last official series of CPI(UNME) was based on 1984–85 = 100.
• Coverage: The index was compiled for 59 selected urban centres, representing various states and union territories.
• Weighting Pattern: Weights were assigned to different categories of consumption expenditure based on household budget surveys conducted in the reference period.
• Frequency of Compilation: The CPI(UNME) was published monthly by the CSO.

The index employed Laspeyres’ formula, which measures the cost of purchasing a fixed basket of goods at current prices compared with the base year prices, thereby indicating changes in the cost of living.

Components of the Index

The consumption basket of the CPI(UNME) was divided into several major groups:

• Food and Beverages – cereals, pulses, milk, vegetables, fruits, meat, and beverages.
• Clothing and Footwear – garments, shoes, and related accessories.
• Housing – rent, repairs, and maintenance.
• Fuel and Light – electricity, kerosene, and cooking gas.
• Miscellaneous – medical care, education, recreation, and transport.

Among these, food and housing constituted the largest share in the overall weighting pattern, reflecting the dominant expenditure areas for urban salaried households.

Significance and Applications

The CPI(UNME) played a vital role in economic policy formulation, particularly in matters related to income policy, wage indexation, and inflation measurement. Its uses included:

• Adjustment of Dearness Allowance (DA): Government and public sector employers used the CPI(UNME) to revise DA rates for employees.
• Inflation Analysis: It provided insights into inflationary trends for middle-income urban classes.
• Wage Agreements: Labour unions and employers used it as a benchmark in collective bargaining processes.
• Policy Planning: The index helped policymakers assess the impact of price changes on urban consumption patterns.

Replacement by New Indices

Despite its early utility, the CPI(UNME) series was discontinued in 2008 due to methodological limitations and changing consumption patterns. It was gradually replaced by a more comprehensive Consumer Price Index (CPI) system developed by MoSPI, which included:

• CPI for Industrial Workers (CPI-IW)
• CPI for Agricultural Labourers (CPI-AL)
• CPI for Rural Labourers (CPI-RL)
• CPI (Combined) – representing both rural and urban populations.

The CPI (Urban) component of the new CPI (Combined) index now serves as a broader and more contemporary measure of price movements for the urban population, encompassing both manual and non-manual employees. The new CPI, with 2012 as the base year, is published monthly by the NSO and is used as the headline inflation indicator in India.

Limitations of CPI(UNME)

While the CPI(UNME) served its purpose effectively during its operational period, several issues led to its discontinuation:

• Outdated Consumption Basket: The expenditure pattern used in the index no longer represented the evolving lifestyle and consumption habits of urban professionals.
• Limited Coverage: It covered only a small segment of the urban population, excluding many service sector employees and self-employed groups.
• Data Collection Challenges: Maintaining price data from numerous centres was resource-intensive and prone to reporting delays.
• Lack of Representativeness: Rapid urbanisation and diversification of occupations reduced the relevance of the index to the broader urban economy.

Transition to the New CPI Framework

Recognising these challenges, the Government of India introduced a new CPI series to provide a more comprehensive and updated measure of consumer prices. The new system was designed to integrate various consumer segments and ensure greater comparability with international standards.
The CPI (Urban) and CPI (Rural) indices, introduced in 2011, use modern sampling techniques, computerised data collection, and updated weighting patterns based on the NSS 68th round of the Household Consumer Expenditure Survey (2011–12). The composite CPI (Combined) is now used by the Reserve Bank of India (RBI) as the principal measure for monetary policy decisions, replacing earlier indices including the CPI(UNME).