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Consumer Price Index (CPI)

Check out the details about Consumer Price Index (CPI).

Introduction

  • Consumer Price Index (CPI) is one of the price indices used to measure the change in the retail prices of goods and services consumed by a defined population group in a given area.
  • The CPI basket covers a wide range of items which consists of 448 items in rural and 460 items in urban basket. Thus, this large basket of goods and services represents the cost of living or the utility derived by the consumers at a given level of their income, prices and tastes.
  • It is an important economic indicator and is widely considered as a barometer of inflation, a tool for monitoring price stability and as a deflator in the national accounts.
  • The National Statistical Office (NSO), under the Ministry of Statistics and Programme Implementation compiles CPI separately for rural, urban, and combined sectors on a monthly basis. 

Consumer Price Index (Urban) and Consumer Price Index (Rural)

  • These indices reflect the changes in the price levels of various goods and services consumed by the urban and rural population respectively.
  • They are compiled and computed by the Central Statics Office (CSO) which comes under the Ministry of Statics and Programme Implementation. 
  • The indices are compiled at State/UT and All India levels and are based on 2012 as base year.
  • CPI (urban) covers 310 towns while the span of CPI (rural) is 1181 villages. 
  • Index Numbers for both rural and urban areas and also combined have been started from January 2011 index onwards. 
  • Provisional indices with the time lag of 30 days and final data for all India and also for all the States/UTs are released with a time lag of two months.

CPI for Industrial Workers (CPI-IW)

  • This index is the oldest among the CPI indices as its dissemination started as early as in 1946.
  • Since 1958-59, the compilation of the CPI (IW) has been started by the Labour Bureau under the Ministry of Labour & Employment.
  • It measures a change over time in the prices of a fixed basket of goods and services consumed by Industrial Workers.
  • It  is currently calculated at base year  2001.
  • The index has a time lag of one month and is released on the last working day of the month.
  • It is used for wage indexation and fixation of dearness allowance for government employees.

CPI for Agricultural Labour and Rural Labour (CPI-AL/RL)

  • The Labour Bureau has been issuing CPI Numbers for Agricultural Labourers since 1964. 
  • CPI-AL is basically used for revising minimum wages for agricultural labour in different States. 
  • The rural retail prices for these two index series are the same, but the weightage is different.
  • The index is used for determining minimum wages and those for the government’s rural jobs programme under the Mahatma Gandhi National Rural Employment Guarantee Act.
  • The Labour Bureau has started the exercise of revising the base year for CPI-AL/RL to 2019-20, from 1986-87, besides developing an index for all states and Union Territories (UTs).
  • The new index will take into account significant change in the consumption basket over the past three decades and could result in an upward revision in MGNREGA wages as well as minimum wages that will be determined under the Code on Wages.
  • Currently, CPI-AL/RL with 1986-87 base is available for only 20 states. 
  • As a practice, states or UTs with no dedicated index often use the index of neighbouring states to determine their minimum or NREGA wages. 

Consumer Food Price Index (CFPI)

  • It is a measure of change in retail prices of food products consumed by a defined population group. 
  • It is released by the Central Statistics Office (CSO), in three categories-rural, urban and combined – separately on an all India basis from May, 2014. 
  • Like the Consumer Price Index (CPI), the CFPI is also calculated on a monthly basis. 
  • The base year presently used is 2012.
  • Measurement of food price movement is important to assess the changes in food prices as well as its impact on the general price level.
  • Inflation in India is caused mostly by supply disturbances led by food items. 
  • The Methodology for the calculation of CFPI is similar to that of CPI. Base year and data are also the same.