“Food Dominance in CPI Decline in Rural and Urban Areas”
- CPI dominance could decline by up to 6.5 percentage points in rural areas and 3.4 percentage points in urban areas.
- Government panel considering changes to CPI basket and base year inflation series revision.
- CPI last revised in 2011-12 due to inaccuracies in the 2017-18 Household Consumption Expenditure Survey.
Inflation in India: Consumer Price Index (CPI) and Wholesale Price Index (WPI)
Inflation Overview
- Inflation refers to the rise in prices of goods and services of daily or common use.
- It measures the average price change in a basket of commodities and services over time.
- Inflation rate indicates the rate at which prices have been rising in an economy.
Methodology of Inflation
- Inflation is measured by two main indices: WPI (Wholesale Price Index) and CPI (Consumer Price Index).
- CPI measures retail inflation by collecting the change in prices of most common goods and services used by consumers.
- The base year for CPI is 2012.
Wholesale Price Index (WPI)
- Measures changes in prices of goods sold and traded in bulk by wholesale businesses.
- Published by the Office of Economic Adviser, Ministry of Commerce and Industry.
- Widely used inflation indicator in India.
- Criticized for not capturing changes in the purchasing power of a unit of a country’s currency.
- Base year revised from 2004-05 to 2011-12 in 2017.
Consumer Price Index (CPI)
- Measures price changes from the perspective of a retail buyer.
- Released by the National Statistical Office (NSO).
- Calculates the difference in the price of commodities and services.
- Four types: CPI for Industrial Workers (IW), CPI for Agricultural Labourer (AL), CPI for Rural Labourer (RL), and CPI (Rural/Urban/Combined).
- Base Year for CPI is 2012.
- The Monetary Policy Committee (MPC) uses CPI data to control inflation.
Types of CPI
- CPI for Industrial Workers (IW), Agricultural Labourers (AL), Rural Labourers (RL), and Rural/Urban/Combined.
- Compilation by the Labour Bureau in the Ministry of Labour and Employment and the National Statistical Office (NSO).
