CPI

CPI

Subject: Economy

Context : The all India Consumer Price Index for Industrial Workers (CPI-IW) for June increased by 1.1 points and stood at 121.7. It increased by 0.91 per cent than May and 0.61 per cent when compared to June 2020.

Concept:

• CPI is a measure of retail inflation (WPI measure wholesale inflation) in economy. It is calculated on monthly basis. There is also an annual report with a 1-month lag.
• Consumer Price Index or CPI is the measure of changes in the price level of a basket of consumer goods and services bought by households. CPI is a numerical estimation calculated using the rates of a sample of representative objects the prices of which are gathered periodically.
• The CPI captures changes in price level at the consumer level.
• Changes in prices at the producer level are tracked by the Wholesale Price Index (WPI).
• CPI can capture the change in the prices of services which the WPI cannot.

Various Indices of CPI are:

• CPI – Industrial Workers (CPI -IW): 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.
• CPI – Agricultural Labourers (CPI -AL): This index measures the change in the price of commodity basket consumed by the agricultural labourers. It is this used to revise minimum wages for agricultural labour in different States.
• CPI – Rural Labourers: This index measures the change in the price of commodity basket consumed by the rural labourers.
• The above indices are published monthly by Labour Bureau under the Ministry of Labour and Employment for all India as well as States and Union Territories.
• Since the above three indices covered only a segment of the population and not the overall nation, we Designed three more indices of CPI.
• CPI – Rural: This index measures the change in the price of commodity basket consumed by the rural population
• CPI – Urban: This index measures the change in the price of commodity basket consumed by urban population
• CPI – Combined: It is computed by combining CPI Rural and CPI Urban Index The base year for the above three indices is 2011-12 and are published monthly by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation.

Why CPI is important?

• Tracks inflation in economy.
• RBI and other estimating agencies study CPI so as to understand the price change of various commodities and keep a tab on inflation.
• It also gives an idea of cost of living.