Consumer Price Index (CPI)
General Economics Intermediateउपभोक्ता मूल्य सूचकांक
Definition
CPI measures the average change in prices paid by consumers for a basket of goods and services. India uses CPI (Combined) as the official inflation measure for monetary policy targeting. The RBI targets CPI inflation at 4% (+/- 2%). Food items have the highest weight (~46%) in India's CPI basket.
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Why Consumer Price Index (CPI) Matters
Understanding consumer price index (cpi) is essential for anyone following government finances, preparing for competitive exams, or analysing India's economic policy. This concept directly affects how the government allocates resources and plans its fiscal strategy.
In the context of India's Union Budget 2026-27, with a total size of Rs 53.47 lakh crore, terms like consumer price index (cpi) help citizens and analysts evaluate whether the government is on the right fiscal path. The numbers in the budget are only meaningful when one understands the underlying concepts.
For UPSC aspirants, consumer price index (cpi) is frequently tested in both Prelims and Mains, particularly in Paper III (Economic Development). For CA and MBA students, this concept appears in public finance and macroeconomics courses.
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