Consumer Price Index (CPI)

The Consumer Price Index (CPI) is a key economic indicator that measures changes in the average prices of a fixed basket of goods and services over time. It reflects retail inflation and directly impacts the cost of living for households.

Key Features of CPI:

• Compiled by: National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI)
• Current Base Year: 2012
• Purpose: To track changes in consumer prices and measure inflation

What’s in the CPI Basket?

• Food and beverages
• Clothing and footwear
• Housing
• Fuel and light
• Miscellaneous items (education, healthcare, transport, etc.)

How CPI Works:

• The basket of goods/services is fixed in terms of quantity and quality.
• CPI compares the cost of this basket in the current period with the cost in a base period.
• If prices rise, CPI increases (indicating inflation); if prices fall, CPI decreases (deflation or disinflation).

Significance of CPI in India:

• Inflation Targeting: Used by the Reserve Bank of India (RBI) for monetary policy.
• Economic Planning: Guides budget decisions and real growth estimations.
• Wage Adjustments: Helps in revising salaries, pensions, and subsidies.

Types of CPI in India:

1. CPI (Combined) – All-India measure including both urban and rural areas.
2. CPI (IW) – For Industrial Workers; used in wage negotiations and DA calculations.
3. CPI (AL) – For Agricultural Labourers.
4. CPI (RL) – For Rural Labourers.

Each variant addresses different demographic and occupational segments, offering targeted insights into inflation trends across India.