Context:
The headline retail inflation rate in December, based on CPI (Combined), has slipped below the upper limit of the 4+/- 2 per cent band of Reserve Bank of India’s (RBI) medium-term inflation target
Consumer Price Index:
- Measures price changes from the perspective of a retail buyer.
- Released monthly by National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI)
- Calculates the difference in the price of both the commodities and services.
- Base Year – 2012
- Objective – The Index is used for targeting price stability, adjusting dearness allowance, and understanding cost of living, purchasing power, and the expensiveness of goods and services.
- Calculation – By dividing the cost of a fixed basket in the current year by the cost in the base year, then multiplying by 100.
- Primary Components of CPI (along with their weightage) –
- Food and Beverage (45.86%)
- Housing (10.07%)
- Fuel and Light (6.84%)
- Clothing and Footwear (6.53%)
- Pan, tobacco, and intoxicants (2.38%)
- Miscellaneous (28.32%)
Types of CPI:
| Types of CPI | Compiled by |
| CPI for Industrial Workers (IW) | Labour Bureau in the Ministry of Labour and Employment |
| CPI for Agricultural Labourers (AL) | |
| CPI for Rural Labourers (RL) | |
| CPI (Rural/Urban/Combined) | NSO, MoSPI |
| CPI for Urban Non-Manual Employees (CPI-UNME) | NSO, MoSPI |
Source: IE
Previous Year Question
Consider the following statements:
1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI).
2. The WPI does not capture changes in the prices of services, which CPI does.
3. Reserve Bank of India has now adopted WPI as its key measure of inflation and to decide on changing the key policy rates.
Which of the statements given above is/are correct?
[UPSC Civil Services Exam – 2020 Prelims]
(a) 1 and 2 only
(b) 2 only
(c) 3 only
(d) 1, 2 and 3
Answer: (a)