Prelims Level
Mains Level
Prelims Syllabus : Economy Mains Syllabus : Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

In News:

  • Data released by the Central Statistics Office showed consumer price index or CPI-based inflation stood at 2.05% in January against the 18-month low of 2.11% in December, while factory output recovered to 2.4% in December from 0.3% in November.

Explained:

  • This is the sixth straight month where the inflation has remained below the RBI’s medium-term target of 4 per cent.
  • Retail inflation based on the Consumer Price Index (CPI) for December 2018 has also been revised downward to 2.11% from the earlier estimate of 2.19%. The inflation was 5.07% in January 2018.
  • The data released by the Central Statistics Office further said the inflation in the ‘fuel and light’ category also fell to 2.2% in January this year from 4.54% in December 2018.
  • The Reserve Bank of India, in its sixth bimonthly policy review, revised downwards the path of inflation to 2.8 per cent in the fourth quarter of 2018-19, 3.2-3.4 per cent in first-half of 2019-20 and 3.9 per cent in the third quarter of 2019-20, with risks broadly balanced around the central trajectory.

What is CPI?

  • Consumer Price Indices (CPI) measure changes over time in general level of prices of goods and services that households acquire for the purpose of consumption.
  • CPI numbers are widely used as a macroeconomic indicator of inflation, as a tool by governments and central banks for inflation targeting and for monitoring price stability, and as deflators in the national accounts.
  • CPI is also used for indexing dearness allowance to employees for increase in prices. CPI is therefore considered as one of the most important economic indicators.
  • For construction of CPI numbers, two requisite components are weighting diagrams (consumption patterns) and price data collected at regular intervals.
  • The data refers to group wise all India Consumer Price Index for Rural & Urban with base year 2012. The dataset is published by Central Statistical Office (Ministry of statistics and programme implementation) and released on 12th of every month.
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