Study of Consumer Price Index in India

Topics: Inflation, Consumer price index, Price index Pages: 6 (1640 words) Published: October 24, 2012
Consumer Price Index
Consumer Price Index (CPI) in India comprises multiple series classified based on different economic groups. There are four series 1. CPI UNME (Urban Non-Manual Employee)
2. CPI AL (Agricultural Labourer)
3. CPI RL (Rural Labourer)
4. CPI IW (Industrial Worker)
Central Statistical Organization is responsible for calculating and publishing the CPI UNME series, while Department of Labour is for others CPI indexes. All above CPI’s are calculated based on the base year 1982. The National Statistical Commission (2001) recommended that there should be three indexes for – rural, urban and all India. So from February 2011 CSO publish CPI(urban), CPI(rural) and CPI(combined) instead of the CPI(UNME) on base 2010 = 100. New CPI indexes are release by the Ministry of Statistics and Program Implementations, Government of India every month. They first publish the provisional indices and then final. Giving example in month of August, 2012 concerned ministry provides the provisional CPI data for month of July and final data for June. Price data are collected from selected towns by the Field Operations Division of NSSO and from selected villages by the Department of Posts. Price data are received through web portals being maintained by the National Informatics Centre. To calculate the CPI numbers, we need consumption pattern i.e. weighting diagram of components and latest price data of all components. Weighting Diagram

Weighting diagram gives information about the percentage of consumption for each item. The weighting diagram is based on the consumer consumption of rural and urban household obtained from the NSS 61st round Consumer Expenditure Survey data (2004-05). To update latest trend of consumption weighting diagram gets updated on regular basis. Non-consumption expenditure such as wages to servants has been excluded. For the purpose of preparation of weighting diagrams only consumption expenditure has been considered. Items in consumption expenditure classified into groups and subgroups considering the Standard International Classification and COICOP (Classification of Individual consumption according to purpose). Criteria of Selection of Items

For choosing the correct items different rules were adopted according to their suitability, popularity and importance. So government decided four-fold criteria, which discussed below: (i) All items from PDS system

(ii) All items responsible for 1% or more expenditure at sub-group level (iii) All items accounting for more than particular percentage of expenditure of all consumption items: a. Food, Housing & Miscellaneous > 0.04%

b. Fuel > 0.03%
c. Clothing > 0.02%
(iv) All items for which more than 75% households have reported consumption.

All consumption items satisfying any of the above four conditions were included. These are also called as weighted items. All India weights of CPI (Rural), CPI (Urban) and CPI (Combined) are as under: New series of CPI—All India weights

Sub group/group| Rural| Urban| Combined |
Cereals and products| 19.08| 8.73| 14.59|
Pulses and products| 3.25| 1.87| 2.65|
Milk and milk products| 8.59| 6.61| 7.73|
Oils and fats| 4.67| 2.89| 3.90|
Egg, fish and meat| 3.38| 2.26| 2.89|
Vegetables| 6.57| 3.96| 5.44|
Fruits| 1.90| 1.88| 1.89|
Sugar etc| 2.41| 1.26| 1.91|
Condiments and spices| 2.13| 1.16| 1.71|
Non- alcoholic beverages| 2.04| 2.02| 2.03|
Prepared meals etc| 2.57| 3.17| 2.83|
Pan, tobacco and Intoxicants| 2.73| 1.35| 2.13|
Food, beverages and tobacco| 59.31| 37.15| 49.71|
Fuel and light| 10.42| 8.40| 9.49|
Clothing and bedding| 4.60| 3.34| 4.05|
Footwear| 0.77| 0.57| 0.68|
Clothing, bedding and footwear| 5.36| 3.91| 4.73|
Housing| | 22.53| 9.77|
Education| 2.71| 4.18| 3.35|
Medical care| 6.72| 4.34| 5.69|
Recreation and amusement| 1.00...

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