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Inflation Indices and their Evolution in India

PYQs

8

Articles

1

Momentum

21

Phase IFoundation

Background

Overview

Inflation management is a core function of the RBI's monetary policy. Understanding the different indices, their methodologies, and recent upgrades is vital for comprehending economic policy decisions, their impact on various stakeholders, and the overall economic environment.

Inflation indices are statistical measures that track changes in the price level of a basket of goods and services over time, serving as critical tools for economic analysis, monetary policy formulation, and adjusting wages and benefits. India primarily uses the Consumer Price Index (CPI) and historically the Wholesale Price Index (WPI) to gauge inflation.

Phase IIStatic core

Facts & tables

Key facts

CPI Updates

CPI base year updated to 2024, item basket revised based on 2023-24 Household Consumption Expenditure Survey, increasing items from 299 to 358.

WPI Updates

WPI base year revised to 2022-23, number of items expanded from 697 to 957, and categories reorganized (e.g., crude petroleum moved to 'Fuel and Power').

Introduction of PPI

New Producer Price Index (PPI) introduced to accurately capture producer-level prices by tracking input and output prices separately and excluding transport and indirect taxes.

WPI Phasing Out

The PPI will replace the WPI entirely over the next five years, making CPI and PPI the country's two principal price indices.

Reference table

Comparison of Key Price Indices

IndexMeasuresBase Year (New)Key Feature
Consumer Price Index (CPI)Retail price changes (consumer-end)2024Reflects current household consumption patterns
Wholesale Price Index (WPI)Wholesale price changes (producer-end, includes taxes/transport)2022-23To be phased out in 5 years
Producer Price Index (PPI)Producer-level prices (inputs & outputs, excludes taxes/transport)Introduced (current)More accurate for producer prices, includes services

Reference table

Static syllabus anchors

TypeReference
Conceptual areaIndian Economy

Reference table

Institutions & roles

BodyRole
Ministry of Statistics and Programme Implementation (MoSPI)Releases cpi
Ministry of Commerce and IndustryReleases wpi and ppi
Reserve Bank of India (RBI)Uses cpi for monetary policy
Phase IIIExam lens

Prelims angle

Overview

Prelims angle: Multi-statement analysis

Prelims angle: Conceptual understanding

Quick revision

  • CPI base year 2024, updated consumption basket.
  • WPI base year 2022-23, expanded items, to be phased out.
  • PPI introduced, measures producer prices (inputs/outputs), excludes taxes/transport.
  • RBI uses CPI for monetary policy.
  • MoSPI releases CPI, Commerce Ministry releases WPI/PPI.

High-confidence PYQs

2023Multi-statement analysis, Conceptual understanding

Correct the following statements: Statement-I: In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes. Statement-...

EconomyOpen question
2022Statement-based questions, Conceptual understanding

In India, which one of the following is responsible for maintaining price stability by controlling inflation?

EconomyOpen question

With reference to Convertible Bonds consider the following statements: 1. As there is an option to exchange the bond for equity, Convertible Bonds pay a low...

EconomyOpen question
2022Institutional roles and functions, Factual recall

In India, which one of the following is responsible for maintaining price stability by controlling inflation?

EconomyOpen question

With reference to Convertible Bonds consider the following statements: 1. As there is an option to exchange the bond for equity, Convertible Bonds pay a low...

EconomyOpen question
2021Multi-statement analysis, Conceptual understanding

With reference to Indian economy, demand pull-inflation can be caused/increased by which of the following? 1. Expansionary policies 2. Fiscal stimulus 3. Inf...

EconomyOpen question
2020Multi-statement analysis, Conceptual understanding

Consider the following statements: 1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI). 2. The WPI doe...

EconomyOpen question
2015Factual recall, Terminology-based question

Which of the following brings out the ‘Consumer Price Index Number for Industrial Workers’?

EconomyOpen question

In the Index of Eight Core Industries, which one of the following is given the highest weight?

EconomyOpen question
2015Factual recall, Institutional roles and functions

Which of the following brings out the ‘Consumer Price Index Number for Industrial Workers’?

EconomyOpen question

In the Index of Eight Core Industries, which one of the following is given the highest weight?

EconomyOpen question
2013Conceptual understanding, Multi-statement analysis

A rise in the general level of prices may be caused by: 1. an increase in the money supply 2. a decrease in the aggregate level of output 3. an increase in t...

EconomyOpen question

Topic timeline

Indian Economy
Prelims 2013· Conceptual understanding, Multi-statement analysis

A rise in the general level of prices may be caused by: 1. an increase in the money supply 2. a decrease in the aggregate level of output 3. an increase in t...

Open question
Prelims 2015· Factual recall, Terminology-based question

Which of the following brings out the ‘Consumer Price Index Number for Industrial Workers’?

Open question

In the Index of Eight Core Industries, which one of the following is given the highest weight?

Open question
Prelims 2015· Factual recall, Institutional roles and functions

Which of the following brings out the ‘Consumer Price Index Number for Industrial Workers’?

Open question

In the Index of Eight Core Industries, which one of the following is given the highest weight?

Open question
Prelims 2020· Multi-statement analysis, Conceptual understanding

Consider the following statements: 1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI). 2. The WPI doe...

Open question
Prelims 2021· Multi-statement analysis, Conceptual understanding

With reference to Indian economy, demand pull-inflation can be caused/increased by which of the following? 1. Expansionary policies 2. Fiscal stimulus 3. Inf...

Open question
Prelims 2022· Statement-based questions, Conceptual understanding

In India, which one of the following is responsible for maintaining price stability by controlling inflation?

Open question

With reference to Convertible Bonds consider the following statements: 1. As there is an option to exchange the bond for equity, Convertible Bonds pay a low...

Open question
Prelims 2022· Institutional roles and functions, Factual recall

In India, which one of the following is responsible for maintaining price stability by controlling inflation?

Open question

With reference to Convertible Bonds consider the following statements: 1. As there is an option to exchange the bond for equity, Convertible Bonds pay a low...

Open question
Prelims 2023· Multi-statement analysis, Conceptual understanding

Correct the following statements: Statement-I: In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes. Statement-...

Open question

Why have India’s statistical databases been upgraded? | Explained

21 Jun 2026 · India's inflation measurement system has been significantly upgraded with revisions to CPI and WPI, and the introduction of PPI. CPI's base year is now 2024 with an updated consumption basket. WPI's base year is 2022-23 with expanded items. The new PPI, which more accurately reflects producer prices by excluding indirect taxes and transport costs, will eventually replace the WPI, making CPI and PPI the primary inflation gauges.

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Inflation Indices and their Evolution in India

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National Income Accounting and Measurement in India

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