Consumer Price Index (CPI)

Consumer Price Index (CPI)
Source: Tavaga

Consumer Price Index (CPI) is a value calculated by taking the weighted average of the changes in the price of a basket of consumer goods and services used by consumers on a daily basis like fast-moving consumer goods (toiletries, food, etc.), healthcare among many.

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CPI is used as an indicator to analyze the inflation or deflation that an economy faces. Also, CPI acts as a good measure for the Cost of Living. The CPI in India is released on the 12th of every month by the Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation taking 2010 as the base year (i.e., CPI for 2010 = 100 for all states/UT(s) of India).


Suppose we consider an economy that incorporates transport, healthcare for consumer services and bread, and rice for consumer goods. Suppose the price of each mentioned entity changes by some value. Then the CPI is the weighted average (say the consumption of rice is more than bread, rice has a higher weight than bread) of the price changes.