Consumer Price Index

CPI or Consumer Price index is a general price level index prepared by taking price of commodities paid by consumers in retail market. This Price index tells inflation effect direct on consumers. Whereas WPI price quotations are taken from wholesale market, one level before CPI’s retail market quotations.

Why different CPI are released by authority ?
As stated above, CPI objective is to fathom inflation effect on consumer, but different consumer consume different set of commodities. Example: An agricultural laborer will spend almost 70% of his wage on his food necessity.  Whereas it is not same for urban non manual laborer.
Due to these different consumption pattern, & to assess effect of inflation in realistic manner, Govt release different CPI numbers.

Different type of CPI:
CPI numbers are released for all states, UT and all India, with CPI (Rural) & CPI (Urban) for each.
The consumption pattern of consumer is taken from National Sample Survey 68th round of consumer expenditure survey. NSS employee move from home to home, shop to shop and ask people about their consumption choice. The broad pattern becomes part of consumer expenditure survey.

Components of CPI:
Food, Beverages & Tobacco (Highest weight)
Fuel & Light
Clothing, bedding & Footwear
Housing (0% weight in rural CPI)
Miscellaneous (Education, transport etc)

Base year: 2012 for both rural and urban.

Old CPI’s:
A) BY Labor bureau, Ministry of Labor

  1.  CPI IW (Industrial Worker):
    -This CPI mainly focus on 78 centres across India, and an overall CPI for all India
    -Mainly focus on workers of Mines, plantation, factories etc worker and not bankers and vodafone employee which fall under different CPI
    – Help looking at inflation consequences to these workers and decide new wage by increasing the dearness allowance
    – Base year = 2001 = 100
  2.  CPI AL (Agricultural laborer)
    –  Help assess inflation consequence on Agricultural laborer, & decide minimum wage
    – Base year = 1986-87 = 100
  3.  CPI Rural laborer:
    – Mostly same as Rural laborer

B) By Central Statistical Organisation:

  1.  CPI UNME (Urban Non manual employee)
    Inflation consequence on Vodafone employee, bankers
    Base year = 1984-85 = 100
    For 59 urban centres and all India

To read comparison of CPI with WPI click here

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