Consumer Price Index
An index tracking the price of a fixed basket of goods and services bought by households.
Formula
CPI = (Cost of the Basket in the Current Period / Cost of the Basket in the Base Period) x 100
Unit
index points
In depth
The CPI is the headline inflation measure in India and the one the Reserve Bank targets, having replaced the wholesale price index in that role in 2016. Food and beverages carry close to 46% of the weight, which makes Indian CPI unusually sensitive to monsoon and crop conditions and produces volatility that has little to do with monetary policy. The basket is fixed between revisions, so it does not capture substitution when consumers switch away from items that have become expensive. Your personal inflation rate can differ substantially from the published figure depending on what you actually spend on.
Worked example
A basket costing ₹100 in the base year and ₹178 now gives a CPI of 178. If food, at 46% of the basket, rises 12% while everything else rises 3%, headline inflation is 0.46 x 12 + 0.54 x 3 = 7.14%.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Consumer Price Index” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.