Consumer Price Index
2021 JUL 29
Preliminary >
Miscellaneous > Reports and indices > Inflation
Why in news?
- Consumer inflation measured by Consumer Price Index (CPI) in the country was 6.26% in June, the second consecutive month when India’s CPI has stayed above the 6% mark, the upper limit of the Reserve Bank of India’s (RBI) tolerance band.
What is CPI?
- It is a comprehensive measure used for estimation of price changes in a basket of goods and services representative of consumption expenditure in an economy.
- The CPI measures changes only in one of the factors - prices.
- It is calculated on a monthly basis.
- Base year for CPI (Rural, Urban and Combined) is 2012.
About CPI Basket
- The basket of goods and services represents the level of living or the utility derived by the consumers at given levels of their income, prices and tastes.
- The number of items in CPI basket include 448 in rural and 460 in urban.
- Items can be classified in to six groups
- Food and beverages
- Miscellaneous (health, education etc.)
- Fuel & Light
- Clothing & Footwear
- Pan, Tobacco and Intoxicants
- Weightage to these groups will vary in CPI rural, CPI urban and CPI combined.
- For example: weightage of food and beverages in CPI rural, CPI urban and CPI combined are 54%, 36% and 45% respectively.
What is its significance?
- This index 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 national accounts.
- Consumer price index is used as a measure of inflation in around 157 countries.
- The dearness allowance of Government employees and wage contracts between labour and employer is based on this index.
Types of CPI compiled in India
- Presently the consumer price indices compiled in India are:
- Sector specific
- CPI for Industrial workers - CPI(IW)
- CPI for Agricultural Labourers - CPI(AL)
- CPI for Rural Labourers- CPI(RL)
- Not sector specific:
- CPI for all India or CPI combined
- CPI Rural
- CPI Urban
- The CPI (IW), CPI (AL) and CPI (RL) are occupation specific and are compiled by Labour Bureau under Ministry of Labour and Employment.
- CPI -Urban, CPI-Rural and CPI-combined are compiled by Central Statistical Organization under Ministry of Statistics and Programme Implementation.
- As per the agreement on Monetary Policy Framework between the RBI and Government, RBI has started using CPI-combined as the sole inflation measure for the purpose of monetary policy.
PRELIMS QUESTION
Which of the following Consumer price indices in India are published by Labour Bureau:
1.CPI-Rural
2.CPI-Industrial worker
3.CPI for Rural Labourers- CPI(RL)
Select the correct answer using the code given below:
(a)1 and 2 only
(b)1 and 3 only
(c)2 and 3 only
(d)1,2 and 3
Answer to prelims question