Historical Value of CPI Index in India
In this article, we will see the India’s Consumer Price Index Trend- combined and segment specific, also, why does analyzing the CPI trend is important. In our previous article, we have discussed what is consumer price index in detail.
IMPOARTANCE OF CPI
1. Inflation is a measure of rise in the general price level of all the goods and services in an economy. These general price level varies inversely with the purchasing power of a unit of money. For example, with the inflation in the economy, comparatively less quantity of goods can be purchased in future with the same one rupee. As such, inflation is often viewed as a reduction in the purchasing power of money. In such situations, CPI numbers are widely used as a macroeconomic indicator of inflation and the annual percentage change in CPI is used as a measure of inflation.
2. Price stability is considered as a crucial pre-condition for sustained growth in economic activity and employment by the nations all over the world. CPI is a tool used by governments and central banks for targeting inflation and monitoring price stability.
3. System of National Accounts(SNA) covers the estimates of household consumption expenditures within the country. The weights for CPI are determined on basis of National Accounts Statistics relating to Final Household Consumption Expenditures. CPI’s sub-indices are used to deflate the components of these household consumption expenditure in National Accounts, thus CPI acts as a deflator in the national accounts.
4. Indexation is the macro-economic policy measure used by the countries across the world to damp the adverse effects of inflation. In short, Indexation is the periodic adjustment of money-value (e.g. wages, salaries, pension, rent etc.) in relation to changes in a price index that reflects inflation. Thus, CPI is widely used to adjust wages as well as social security and other benefits to compensate, partly or completely, for changes in the cost of living by indexing dearness allowance to employees for increase in consumer prices.
5. CPI index is widely used by Governments for formulation of general economic policy particularly with respect to wages, prices and taxation. The use of the CPI is reported in the matter of adjustment of the amount of alimony payments and annuities.
India’s Consumer Price Index Trend
- Consumer Price Index (CPI) in April 2019 rose by 2.92% (YoY) from an year ago April-2018.
- According to data released by the Central Statistics Office, India’s CPI in Apr 2019 was fixed at 141.1, compared to 137.1 reported in the corresponding period last year ie. April-2018.
- The CPI in Apr 2019 for urban areas was 140.5 and CPI for the rural areas was 140.5.
- This months (April 2019) CPI figure represents a jump of 0.50% (MoM) since last month, as CPI(Combined) for March 2019 stood at 140.4.
India’s Segment Specific CPI Trend
What DOes CPI Signify?
- For Current series of CPI, the base year has been taken as 2012. Let us assume that the basket of goods and services was costing Rs.100 in the year 2012 (Base Year).
- Consumer Price Index (CPI) informs us that, the same basket of goods and services
|was costing Rs. 104.60 in Jan 2013|
|was costing Rs. 113.60 in Jan 2014|
|was costing Rs. 119.50 in Jan 2015|
|was costing Rs. 126.30 in Jan 2016|
|was costing Rs. 130.30 in Jan 2017|
|was costing Rs. 136.90 in Jan 2018|
|was costing Rs. 139.60 in Jan 2019|
|was costing Rs. 141.10 in Apr 2019|
RELEASING OF CPI DATA IN INDIA
- In India, the Consumer Price Index is calculated on a monthly basis and is released every month at 5.30 p.m. on 12th day of the following month. If it is a holiday, then it is released on the next working day.
- CPIs (Rural, Urban, Combined) along with inflation rates for Sub-group, Group, CFPI and General Index (All-Groups) are released through a Press Note and are also uploaded on the website of the Ministry of Statistics and Programme Implementation.
- We have discussed – How CPI is Calculated in our previous article.