CPI stands for Consumer Price Index, it measures price changes from the perspective of a retail buyer. It is released by the National Statistical Office (NSO).
The CPI calculates the difference in the price of commodities and services such as food, medical care, education, electronics etc, which Indian consumers buy for use. The CPI has several sub-groups including food and beverages, fuel and light, housing and clothing, bedding and footwear.
There are basically four types of CPI, CPI for Industrial Workers (IW), CPI for Agricultural Labourer (AL), CPI for Rural Labourer (RL), CPI (Rural/Urban/Combined).
Of these, the first three are compiled by the Labour Bureau in the Ministry of Labour and Employment. Fourth is compiled by the National Statistical Office (NSO) in the Ministry of Statistics and Programme Implementation.
The base Year for CPI is 2012. The Monetary Policy Committee (MPC) uses CPI data to control inflation.
In order to understand better about CPI it is important to know what exactly is Wholesale Price Index (WPI).
Published by the Office of Economic Adviser, Ministry of Commerce and Industry, it measures the changes in the prices of goods sold and traded in bulk by wholesale businesses to other businesses. It is the most widely used inflation indicator in India.
One of the major criticism for this index is that the general public does not buy products at wholesale prices. The base year of All-India WPI has been revised from 2004-05 to 2011-12 in 2017.
The differne between WPI and CPI is that WPI tracks inflation at the producer level and CPI captures changes in prices levels at the consumer level. WPI does not capture changes in the prices of services, which CPI does. In April 2014, the RBI had adopted the CPI as its key measure of inflation.