Consumer Price Index (CPI)

The Consumer Price Index, or CPI, is a number that shows how much the cost of living has gone up or down over time. It tells us how much households need to spend on a fixed set of goods and services like food, clothing, housing, fuel, healthcare, and education. If the CPI increases, it means prices are rising and our money buys fewer things. If it decreases, it means prices are falling and things become cheaper.

• In India, the CPI is prepared by the National Statistical Office (NSO), which works under the Ministry of Statistics and Programme Implementation (MoSPI). At present, the index is calculated using the base year 2012.

How CPI is Calculated

To calculate CPI, a “basket” of goods and services that people commonly buy is chosen. This basket always remains the same in terms of items and quantities. Then, the cost of this basket in the present is compared to the cost in an earlier period. If the cost has gone up, CPI rises (inflation). If the cost has gone down, CPI falls (deflation).

Why CPI is Important

• CPI was first used to adjust wages for workers so their income kept pace with rising prices. Over time, it has become one of the most important tools for understanding the economy. The Reserve Bank of India (RBI) uses CPI to decide monetary policy and to keep inflation under control. CPI is also used to measure the real growth of the economy after removing the effect of rising prices.

Types of CPI in India

Apart from the general CPI (CPI-Combined), special indices are also prepared for different groups of people. CPI (IW) is for Industrial Workers, CPI (AL) is for Agricultural Labourers, and CPI (RL) is for Rural Labourers. These are used for wage revision, rural planning, and analysing inflation in specific sections of society.

 

CPI in March 2025 – Key Highlights In March 2025, India’s food inflation fell to 2.69 percent, the lowest since November 2021. Rural food inflation was recorded at 2.82 percent, while urban food inflation was slightly lower at 2.48 percent. The fall in food prices was due to cheaper vegetables, eggs, pulses, cereals, milk, meat, and fish. In rural areas, overall inflation dropped from 3.79 percent in February to 3.25 percent in March. In urban areas, headline inflation rose slightly from 3.32 percent to 3.43 percent, but food inflation came down from 3.15 percent to 2.48 percent. Housing inflation in urban areas increased marginally to 3.03 percent. Fuel and light inflation, which was negative in February, rebounded to 1.48 percent in March. Education costs rose to 3.98 percent, health to 4.26 percent, and transport and communication to 3.30 percent. The items with the highest inflation were coconut oil (56.81 percent), coconut (42.05 percent), gold (34.09 percent), silver (31.57 percent), and grapes (25.55 percent). On the other hand, ginger (-38.11 percent), tomato (-34.96 percent), cauliflower (-25.99 percent), jeera (-25.86 percent), and garlic (-25.22 percent) became cheaper.