Context:  

India’s Consumer Price Index (CPI) based inflation rate touched 5.69% in December.

Consumer Price Index (CPI): Year on Year Inflation Forecast (FY 2023-2024)

• Headline Inflation Rate: December data shows that the Year on Year (YoY)  inflation rate has started rising towards the end of 2023. 

• • Reason: The relative spike in food prices in 4 food groups accounted  for 23% of the total index weight  relative to December 2022.
    • Vegetable prices increased by almost 28%  
    • Pulses were costlier by 21% 
    • spices by 20%.
    • Cereals, too, were costlier by 10%. 
  • Regional variation: Odisha is registering the highest inflation at 8.7% and Delhi is experiencing the lowest at 2.9%
• Core Inflation Rate:  It is the inflation rate after removing the food and fuel inflation that is showing a decreasing trend.
•  FY 2023-2024:  Inflation for the full financial year will likely remain at 5.5%.

What is the Consumer Price Index (CPI)?

•  About: Consumer Price Index (CPI) measures changes over time in the general level of prices of a basket of selected goods and services that households acquire for the purpose of consumption.
• Prepared  by:  National Statistical Office (NSO),  Ministry of Statistics and Programme Implementation (MoSPI)
• Consumer Price Index (CPI) basket: It comprises 299 items.
• Types: 
  • CPI for Industrial Workers (CPI-IW): Compiled by NSO
  • CPI for Urban Non-Manual Employees (CPI-UNME): Compiled by NSO
  • CPI for Agricultural Labourers (CPI-AL): It is used to calculate minimum wages in the agricultural sector across different states and compiled by NSO
  • CPI for Rural Laborers (CPI-RL): Compiled by the Labor Bureau, it reflects price movements specifically for rural laborers.
• Base year: It is 2012  for the current series of indices.
• Method: The monthly price data is collected from 1181 villages and 1114 urban markets spread all across the country. The data for this purpose is collected on a weekly basis by the field staff of NSO.
• Components: Consumer Price Index has 6 main components with differing weights 
  • Food and beverages (45% weight overall with Cereals accounting for 9.67% of the total)
  • Pan, tobacco, and intoxicants (2.38%)
  • Clothing and footwear(6.53%) 
  • Housing  (10.07%)
  • Fuel and light (6.84%)
  • Miscellaneous (services such as education, health care etc.) (28.32%)

News Source: THE INDIAN EXPRESS