Consumer Price Index

• Old Series - The Price Reference Year for this series is 2010, whereas Weight Reference Year is 2004-05.
• Revise Series - Though the Weight Reference Year is July 2011 to June 2012 (reference period of NSS 68th Round), Price Reference Year (Base Year) has been chosen to be calendar year 2012.

Price Reference Year - The year in which the average prices, of goods and services consumed, are taken as base price and equated to 100 and accordingly, CPI for Base Year is 100.

Weight Reference Year - The year in respect of which the data of consumer expenditure survey was used to compute weights for aggregating elementary indices to compile higher level indices i.e. sub-group, group and overall indices.

• Under Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation

• The basket of items and their weighing diagrams have been prepared using the Modified Mixed Reference Period (MMRP8) data of Consumer Expenditure Survey (CES), 2011-12, which is 68th Round of National Sample Survey (NSS).

• A Consumer Price Index (CPI) is designed to measure the changes over time in general level of retail prices of selected goods and services that households purchase for the purpose of consumption. Such changes affect the real purchasing power of consumers’ income and their welfare.

1. CPI (IW)- Consumer Price Index for Industrial Workers
2. CPI (AL)- Consumer Price Index for Agricultural Labourers
3. CPI (RL)- Consumer Price Index for Rural Labourers
4. CPI (UNME)- Consumer Price Index for Urban Non-Manual Employees (which has been discontinued w.e.f. December, 2010)

• The National Statistical Commission (NSC), under Dr. C. Rangarajan, in its Report (2001), observed that CPI numbers catering to specific segments of the population can be considered as partial indices only. These indices are not oriented to reflect a true picture of the price behaviour and effect of price fluctuations of various goods and services consumed by the general population in the country, over a period of time. This Commission, therefore, recommended for compilation of CPI for rural and urban areas. The recommendation of NSC (2001) was further endorsed by the Standing Committee on Finance (2009-10) (15th Lok Sabha, 6th Report on Inflation and Price Rise), which asked the Government to act upon this recommendation without any further delay and accordingly expedite the compilation of the nation–wide Consumer Price Index for urban and rural areas, as a prelude to formulating a national CPI.

• In this backdrop, the Technical Advisory Committee (TAC) on Statistics of Prices and Cost of Living (SPCL) in its forty-fourth meeting held on 30th December, 2005 took the following decisions:

a) The resources proposed to be utilized for revision of CPI (UNME) may be used for compilation of CPI (Urban) and CPI (Rural).

b) Existing series of CPI (UNME) may be continued without revision till CPI (Urban) series gets stabilized.

c) Consumer Expenditure Survey (CES) data of the NSS5 61st round may be used for construction of weighing diagrams for proposed CPI (Urban) and CPI (Rural) series.


• Accordingly, the Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation started releasing Consumer Price Indices (CPI) on base 2010=100 for all-India and States/UTs separately for rural, urban and combined every month with effect from January, 2011.

In years past, countries used their own distinct systems for classifying the range of products covered by their CPI. Most countries have now, however, moved to the international standard classification COICOP (Classification of Individual Consumption according to Purpose).

• Only consumption expenditure has been considered for the purpose of preparation of weighing diagrams. Non-consumption expenditures, like legal expenses etc. have been excluded.

• A 9-digit coding structure has been devised for an item which identifies it uniquely.
1st digit denotes ‘Group’,
2nd digit denotes ‘Category’,
3rd - 4th digits denote ‘Sub-group’,
5th digit denotes ‘Section’,
6th digit denotes ‘Goods/Services’ (‘1’ for Goods and ‘2’ for Services),
7th - 8th digits gives item serial number within Section and
9th digit represents identification of items: Weighted Item or Priced Item.
If a Weighted Item has more than one Priced Items, then ‘X’ is placed at the 9th digit of the item code, else ‘0’.
In case of PDS items, ‘P’ is placed at 9th digit of the item code.

• All India Sub-group/Group Weights -


• Comparison of weighing diagrams of the old and revised series of CPI-


CES = Consumer Expenditure Survey

• Share of CPI (Rural) and CPI (Urban) in CPI (Combined) -
For Uttar Pradesh Rural-64.15 and Urban-35.85

• Prices are collected from 1181 village markets covering all districts and 1114 urban markets distributed over 310 towns of the country.

• One unique feature of the system of compilation of Consumer Price Index is the online transmission of price data. This is a completely paperless survey in the sense that no paper schedules are used for transmission of data. Two independent web portals for rural and urban price data have been developed by the National Informatics Centre (NIC).

Compilation of Indices-

Compilation of CPI numbers generally consists of two stages –

(a) First, price indices are calculated for elementary aggregates, which are known as Item Level indices. These elementary indices are the lowest level of aggregation where prices are combined into price indices. It is also the lowest level of aggregation for which explicit expenditure weights are available.

(b) Then, these elementary price indices are averaged (aggregated) to obtain higher level indices using consumption expenditure as weights, associated with each level. For this purpose, Laspeyeres index formula is used. This explains, why the CPI is often described as a fixed-weighted index or fixed-basket index.
Laspeyeres index formula can be expressed algebraically, in usual notations, as:





Above formula can be written equivalently as:


GM has been used for averaging the price relatives of ith item across all markets/quotations.

• The Consumer Price Index 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. All-India CPIs (Rural, Urban, Combined) along with inflation rates for Sub-group, Group, CFPI and General Index (All-Groups) are released through a Press Note.

• The number of Groups, which was five in the old series, has now been increased to six. ‘Pan, tobacco and intoxicants’, which was a Sub-group under the earlier Group ‘Food, beverages and tobacco’, has now been kept as a separate Group. Accordingly, the Group ‘Food, beverages and tobacco’ has been renamed as ‘Food and beverages’.

• The elementary/item indices are now being computed using Geometric Mean (GM) of the Price Relatives of Current Prices with respect to Base Prices of different markets in consonance with the international practice. In the old series, Arithmetic Mean (AM) was used for that purpose. The advantage of using GM is that it moderates the volatility of the indices as GM is less affected by extreme values.

• Sample size for collection of house rent data for compilation of House Rent Index, which was 6,684 rented dwellings in the old series, has now been doubled to 13,368 rented dwellings in the revised series.

• The methodological improvements and other changes incorporated in the revised series may be categorized into three parts:
(a) shifting from AM to GM for compilation of elementary/item indices;
(b) change in the weighing diagrams; and
(c) increasing the sample size for house rent data collection.