CPI Full Form
What is the full form of CPI?
CPI stands for Consumer Price Index. It measures the weighted average of prices of the variety of goods and services used by consumers. This variety includes apparel, education, communication, medical care, food essentials, transportation, etc. It is the indicator to measure inflation and deflation in the economy. It is calculated by the Ministry of Statistics and Programme Implementation of India. Encompassing people from all income group spending on a variety of goods and services, CPI measures the average price change for a given year in comparison to the base year. The price change is calculated for every item used by the consumers. After the individual price change is calculated, an average price is calculated, which is directly related to the cost of living.
CPI = (Cost of the commodity in the current year⁄Cost of the commodity in the base year)× 100
Uses of CPI
CPI is a metric to measure economic conditions by deriving changes in the price range during the year.
CPI is the indicator of the inflationary and deflationary rate of the economy.
CPI is one of the economic tools that help the government formulate strategies and social policies.
CPI and its tools to measure economic indicators such as retail trade, hourly wage rates, and consumers’ purchasing power.
Consumer price index helps create a price range for each product that consumers of every income group can afford. Companies and Industries use it to decide the price of a commodity.
What is Inflation?
As we were discussing that CPI helps in measuring the inflationary situations of an economy, we should get familiar with the term inflation.
Inflation means a situation persistent with price increases. It is a quantitative measure which ascertains the average price level of various goods and commodities. When inflation increases, the price of the commodities also increases, directly affecting the economy's purchasing power.
Inflation={( CPI2 - CPI1)/ CPI1}100
Where
CPI2 = CPI of the commodity for current year
CPI1= CPI of the commodity for the base year
Indices of CPI
CPI in India has several indices. The Ministry of Labour and Employment in India measures these.
CPI-IL Consumer Price Index for Industrial Labour
CPI-RL Consumer Price Index for Rural Labour
CPI-AL Consumer Price Index for Agricultural Labour
CPI-UNME Consumer Price Index for Urban and Non-manual Employees
Frequently Asked Questions (FAQs)
CPI stands for Consumer Price Index.
CPI is calculated based on the price of the commodities and the consumer’s purchasing power within the bracket of various income groups. CPI is the percentage of average weighted change in the price of the current year in comparison to the base year.
CPI = (Cost of the commodity in the current year⁄Cost of the commodity in the base year) × 100
It is calculated by the Ministry of Statistics and Programme Implementation of India.
CPI helps measure the current inflationary situation and predicts future rates of inflation. The Consumer Price Index measures how much a consumer is willing to pay for particular goods and services. With an increase in inflation, prices also increase, affecting the consumers’ purchasing power.
CPI Inflation is a synonym for Retail Inflation.