Full Form of CPI
In this post describes CPI in full form, the Types of CPI, How to calculate CPI, the Formula of CPI(annual & inflation) Advantages of CPI, and the Limitations of CPI.
CPI: Consumer Price Index, which is a broad index that is mainly used to estimate the changes in prices of products and services that difference represents consumer spending in an economy. Estimating the CPI is a rigorous mathematical process.
CPI also helps to find out the level of inflation or the growth in the price of a product which is determined based on the percentage change in this index over some time. CPI represents the monthly basket of goods and services across the country.
Types of CPI
- CPI for Industrial Workers (IW)
- CPI for Agricultural Labourers (AL)
- CPI for Rural Labourers (RL)
- CPI for Urban Non-Manual Employees (UNME).
How can CPI help?
Various statistical agencies use the CPI to understand the price changes of different commodities and monitor inflation. CPI is also a helpful pointer to understanding the purchasing power of a country’s currency, and the real value of wages, salaries, and pensions.
How to Calculate CPI & Formula for CPI
The CPI is calculated by calculating a base year. The price change is relative to that year. When you calculate the CPI, first divide the price of the 1-year basket by the price of the market basket in the base year. Then, multiply that by 100.
To calculate annual CPI:
Annual CPI= Value of Basket in Current / Value of Basket in Prior Year ×100
Calculate the Inflation rate:
Inflation Rate= New CPI−Prior CPI / Prior CPI ×100
Importance Of the Consumer Price Index (CPI)
CPI is the common tool for assessing inflation in an economy. A country and its citizens experience a decline in the standard of living as a result of rising inflation. As a result, the cost of living will rise gradually.
As the output is lower as a result of higher inflation rates, there will be job losses as a result of rising commodity prices. The CPI can be used to measure changes in the components of national income and serve as a measure of inflation in the economy.
Limitations of the Consumer Price Index(CPI)
CPI cannot account for differences between two different sectors.
It is a technique that considers only certain factors that influence the standard of living when determining the conditional cost of living.
FAQs About CPI
What is the full form of CPI?
CPI stands for Consumer Price Index.
What is the CPI full form in SAP?
CPI in SAP stands for Cloud Platform Integration (CPI), a middleware that integrates third-party applications with users' SAP ERP systems.
Who maintains CPI?
CPI for Industrial Workers (IW) CPI for Agricultural Labourers (AL) CPI for Rural Labourers (RL) CPI for Urban Non-Manual Employees (UNME).