Objective Of Consumer Price Index

To measure the impact of price change on the

purchasing power of the after tax money incomes of wage and salary earner households. Focus was to track inflation Helps in Monetary policy to take decisions , to control inflation

Methodology
Given - Consumer Price Index, Wages To Calculate: Real wages , Purchasing power
Purchasing Power = (1/Consumer Price Index)

100

Real Wages = (Wages/Consumer Price Index)

100

Statement Of Business Scenario

General Price level,Measurement
Consumer price Index(CPI), Wholesale price Index(WPI),

GDP deflator Each is a weighted average of several prices & is presented in the form of index numbers. CPI signals changes in prices facing the consumers. We are explaining annual movement in general price levels in India. Table summarizes the Data and the chart shows the trends in prices. Indian Scenario
Price index CPI Basis Prices Retail Basket Consumptio n Goods and Services. Includes Weights Fixed Quantity weights Lag Two months

p q p1q0
1 0

Wages of Industrial Workers (Average ) of India

Year 1993-93 1994-95 1995-96 1996-97 1997-98 1998-99 Average Weekly Wages-IW 156 173 189 209 278 312 Consumer Price Index 167.2 187.0 208.3 231.8 310.2 384.1

This table shows the Average weekly wages of

Industrial workers of India and CPI

Results & Findings

(a)Shown in the Table (b)The Industrial Workers have the greatest buying power in 1993-94 (c)The %tage Increase in the weekly wages for the year 1998-98 required to provide the same buying power that the employees had in 1993-94 : absolute difference i.e. 93.30 81.22 = 12.08

Importance of CPI In Business

It helps to formulate Economic Policy, Escalate

income payments & measure real earnings. It also measures purchasing power of the consumer in Rs. The purchasing power of the rupee is the value of a rupee in a given year as compared to a base year. When a time series is concerned with such rupee values as retail sales amounts or wage rates the price index is more frequently used to achieve deflation of such time series. The CPI is used in wage negotiations and wage contracts. It also helps in automatic adjustment of wages or the

Conclusion
We are explaining annual movement in general

price levels in India. Table summarizes the Data and the chart shows the trends in prices.
CPI data are reported for Industrial Workers. Table shows the movement in prices between

1993-94 and 1998-99. Though the annual percentage change varies across different indices, the direction of change is similar. The Weekly wages are increasing but Real Wages are Decreasing.