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.

This Story also Contains

1. What is the full form of CPI?
2. Uses of CPI
3. What is Inflation?
4. Indices of CPI

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.

1. CPI-IL Consumer Price Index for Industrial Labour

2. CPI-RL Consumer Price Index for Rural Labour

3. CPI-AL Consumer Price Index for Agricultural Labour

CPI-UNME Consumer Price Index for Urban and Non-manual Employees