CONSUMER PRICE INDEX

CONSUMER PRICE INDEX

Context: CPI (Rural, Urban, Combined) on Base 2012=100 for the month of January 2020 has been released recently. 

CONSUMER PRICE INDEX;

The CPI has been released by National Statistical Office (NSO), Ministry of Statistics and Programme Implementation. In addition to this, Consumer Food Price Index (CFPI) for all India Rural, Urban and Combined are also being released for January 2020. WHAT DOES THE NUMBER SAYS? All India Inflation rates (on point to point basis i.e. current month over same month of last year, i.e., January 2020 over January 2019), based on General Indices and CFPIs are given as follows:

Indices

Jan. 2020 (Prov.)

Dec. 2019 (Final)

Jan. 2019 (Final)

Rural

Urban

Combd.

Rural

Urban

Combd.

Rural

Urban

Combd.

CPI (General)

7.73

7.39

7.59

7.33

7.46

7.35

1.22

2.91

1.97

CFPI

13.02

14.77

13.63

13.04

16.12

14.19

-2.94

-0.88

-2.24

ABOUT CONSUMER PRICE INDEX The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportationfood, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them.  Changes in the CPI are used to assess price changes associated with the cost of living; the CPI is one of the most frequently used statistics for identifying periods of inflation or deflationA CPI can be used to index (i.e. adjust for the effect of inflation) the real value of wages, salaries, and pensions; to regulate prices; and to deflate monetary magnitudes to show changes in real values. The CPI measures the average change in prices over time that consumers pay for a basket of goods and services, commonly known as inflation While it does measure the variation in price for retail goods and other items paid by consumers, it does not include things like savings and investments, and can often exclude spending by visitors from another country.  The index is usually computed monthly. WHAT ARE THE VARIOUS THINGS EXCLUDED FROM CPI? The scope of coverage of the index may be limited and may exclude the following: 

  • Consumers’ expenditure abroad;
  • Visitors’ expenditure within the country (may be excluded in principle if not in practice); 
  • The rural population may or may not be included; 
  • Certain groups such as the very rich or the very poor may be excluded. 
  • Saving and investment are always excluded (though the prices paid for financial services provided by financial intermediaries may be included along with insurance).

WHAT ARE VARIOUS TYPES OF CPI IN INDIA?

Consumer Price Index (CPI) in India comprises multiple series classified based on different economic groups. There are four series, viz the 

  • CPI UNME (Urban Non-Manual Employee) [Now, CPI(Rural/ Urban/ Combined)]: The Central Statistics Office (CSO) which is now the National Statistical Office (NSO) compiles this data.
  • CPI AL (Agricultural Labourer): The Labour Bureau compiles this data to revise minimum wages for agricultural labour in different States.
  • CPI RL (Rural Labourer): Also compiled by the Labour Bureau.
  • CPI IW (Industrial Worker): It tries to measure the alterations over a time period on the prices of a fixed basket of goods and services utilised by Industrial Workers.The target group would be an average working-class family from any of these seven sectors of the economy ranging from factories, mines, plantation, motor transport, port, railways to electricity generation and distribution.  It is compiled by the Labour Bureau

NOTE: While the CPI UNME series is published by the Central Statistical Organisation, the others are published by the Department of Labour. 

From February 2011 the CPI (UNME) released by CSO is replaced as CPI (urban),CPI (rural) and CPI (combined). 

Consumer Price Index is used in calculation of Dearness Allowance which forms an integral part of salary of a Government Employee. Base year to calculate CPI is 2012=100.

CPI Formula: (Cost of basket in current period/ Cost of basket in base period) x 100

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