A consumer price index (CPI) measures changes through time in the price level of

consumer goods and services purchased by households.

The CPI is a statistical estimate constructed using the prices of a sample of

representative items whose prices are collected periodically. Sub-indexes and sub-
sub-indexes are computed for different categories and sub-categories of goods and
services, being combined to produce the overall index with weights reflecting their
shares in the total of the consumer expenditures covered by the index. It is one of
several price indices calculated by most national statistical agencies. The annual
percentage change in a CPI is used as a measure of inflation. A CPI can be used to
index (i.e., adjust for the effect of inflation) the real value of wages, salaries,
pensions, for regulating prices and for deflating monetary magnitudes to show
changes in real values. In most countries, the CPI is, along with the population
census and the USA National Income and Product Accounts, one of the most closely
watched national economic statistics.

Two basic types of data are needed to construct the CPI: price data and weighting data. The price
data are collected for a sample of goods and services from a sample of sales outlets in a sample
of locations for a sample of times. The weighting data are estimates of the shares of the different
types of expenditure in the total expenditure covered by the index. These weights are usually
based upon expenditure data obtained from expenditure surveys for a sample of households or
upon estimates of the composition of consumption expenditure in the National Income and
Product Accounts. Although some of the sampling of items for price collection is done using a
sampling frame and probabilistic sampling methods, many items and outlets are chosen in a
commonsense way (purposive sampling) that does not permit estimation of confidence intervals.
Therefore, the sampling variance cannot be calculated. In any case, a single estimate is required
in most of the purposes for which the index is used.

The index is usually computed monthly, or quarterly in some countries, as a weighted average of
sub-indices for different components of consumer expenditure, such as food, housing, clothing,
each of which is in turn a weighted average of sub-sub-indices. At the most detailed level, the
elementary aggregate level, (for example, men's shirts sold in department stores in San
Francisco), detailed weighting information is unavailable, so indices are computed using an
unweighted arithmetic or geometric mean of the prices of the sampled product offers. (However,
the growing use of scanner data is gradually making weighting information available even at the
most detailed level.) These indices compare prices each month with prices in the price-reference
month. The weights used to combine them into the higher-level aggregates, and then into the
overall index, relate to the estimated expenditures during a preceding whole year of the
consumers covered by the index on the products within its scope in the area covered. Thus the
index is a fixed-weight index, but rarely a true Laspeyres index, since the weight-reference
period of a year and the price-reference period, usually a more recent single month, do not
coincide. It takes time to assemble and process the information used for weighting which, in
addition to household expenditure surveys, may include trade and tax data.

Ideally, the weights would relate to the composition of expenditure during the time between the
price-reference month and the current month. There is a large technical economics literature on
index formulae which would approximate this and which can be shown to approximate what
economic theorists call a true cost of living index. Such an index would show how consumer
expenditure would have to move to compensate for price changes so as to allow consumers to
maintain a constant standard of living. Approximations can only be computed retrospectively,
whereas the index has to appear monthly and, preferably, quite soon. Nevertheless, in some
countries, notably in the United States and Sweden, the philosophy of the index is that it is
inspired by and approximates the notion of a true cost of living (constant utility) index, whereas
in most of Europe it is regarded more pragmatically.

The coverage of the index may be limited. Consumers' expenditure abroad is usually excluded;
visitors' expenditure within the country may be excluded in principle if not in practice; the rural
population may or may not be included; certain groups such as the very rich or the very poor
may be excluded. Saving and investment are always excluded, though the prices paid for
financial services provided by financial intermediaries may be included along with insurance.

The index reference period, usually called the base year, often differs both from the weight-
reference period and the price reference period. This is just a matter of rescaling the whole time-
series to make the value for the index reference-period equal to 100. Annually revised weights
are a desirable but expensive feature of an index, for the older the weights the greater is the
divergence between the current expenditure pattern and that of the weight reference-period.

Calculating the CPI for a single item

Where 1 is usually the comparison year and CPI1 is usually an index of 100.

Alternately, the CPI can be performed as . The "updated

cost" is the price of an item at a given year (say, the price of bread in 1982), divided by the initial
year (the price of bread in 1970), multiplied by one hundred.

Calculating the CPI for multiple items

Example: The prices of 95,000 items from 22,000 stores, and 35,000 rental units are added
together and averaged. They are weighted this way: Housing: 41.4%, Food and Beverage:
17.4%, Transport: 17.0%, Medical Care: 6.9%, Other: 6.9%, Apparel: 6.0%, Entertainment:
4.4%. Taxes (43%) are not included in CPI computation.[3]
NEW DELHI: Cooperative majors Nafed and NCCF today lowered onion prices vendored to consumers in Delhi by
upto Rs 5 at Rs 30-32/kg but open market prices continued to rule high across the country.

Maintaining yesterday's level, onions were sold at Rs 30-50 per kg in retail in the metros except Chennai where the
rate ruled at Rs 60/kg today, traders said

Agri-cooperative Nafed, which had intervened to provide relief to consumers by selling onions at subsidised rate of
Rs 35 per kg, lowered the price from today to Rs 30/kg.

"Our five outlets and 20 mobile vans are selling onion at the rate of Rs 30 per kg in Delhi from today," Nafed
Managing Director Sanjeev Chopra told PTI.

NCCF (National Cooperative Consumers' Federation of India) has also dropped the price to Rs 32/kg.

"NCCF have been selling onion at the rate of Rs 32/kg for the past three days...we may further dip the rate after
assessing market trend this evening," NCCF Managing Director M K Khan said.

NCCF have been selling onions through 10 outlets in the national capital and also started mobile vans.

The Nafed MD attributed drop in prices to boost in the supply particularly due to arrival of the bulb from Pakistan.

Official sources said that the third consignment of 188 tonnes of onions ordered by the government from the
neighbouring country landed at Mundra port in Gujarat yesterday.

With this arrival, a total of 814 tonnes of onions from Pakistan have reached India so far to reinforce the domestic
supply.

State-agencies PEC and STC had contracted 1,000 tonnes of onions from Pakistan to mitigate the crisis triggered by
short supply resulting in prices soaring to Rs 70-85 per kg in major cities in December last.

"The rest 186 tonnes of onions from Pakistan will also arrive in the country soon," the sources said.

Sources in Nafed office at Azadpur (where onions coming from Pakistan are stored and made available to the
cooperatives and surplus stocks sold in the open market) said a total of 240 tonnes of onions from the neighbouring
country have reached so far.

Pak onions are coming to Delhi by road from Mundra port in Kutch district of Gujarat.

Wholesale price of onions maintained yesterday's level of Rs 12-32 per kg in Azadpur market (Asia's biggest
wholesale fruits & vegetables market), General Secretary Onion Merchants Association Rajendra Sharma said.

Cost of another vital produce tomato, which had risen to the level of onions early this week, also stayed steady in the
metros today at Rs 30-60/kg in retail.

NEW DELHI: The sliding wholesale prices of onion pushed down its retail rate by Rs
10 a kg in Delhi and Mumbai today, providing some relief to the consumers who had
been moved to tears due to its skyrocketing cost.

Onion prices dropped to Rs 30-50 a kg in retail in the national capital and Mumbai
from Rs 40-60 a kg yesterday, traders said. But, Kolkata and Chennai were not so
lucky where the vegetable maintained yesterday's level of Rs 45-60 per kg in retail,
they said. Retail price of tomato, which has entered into a contest offlate with
onion, also lowered by Rs 10 a kg in Delhi and Kolkata. It was available at Rs 40-50
a kg in Delhi and at Rs 20-30 a kg in the Eastern metropol today. However, in
Chennai, the retail price of the vegetable increased by Rs 5 a kg at Rs 45 a kg since
yesterday, a report said. Drop in onion prices in Delhi and Mumbai is attributed to
sliding rates in wholesale markets in the past one week. Cost of bulk purchase of
onions has come down by about Rs 18 a kg in Delhi's Azadpur market (Asia's
biggest fruits & vegetables wholesale market) since January 13, when it had
zoomed to Rs 50 a kg. Onion was being sold at Rs 12-32 a kg in Azadpur market
today, General Secretary Onion Merchants Association Rajendra Sharma said. The
cost of onions also relented in other major cities. The Consumer Affairs Ministry data
on retail prices of some essential commodities revealed that onion sold at Rs 34 a
kg in Patna, while it was available at Rs 45 a kg in Lucknow, Rs 33 a kg in
Hyderabad and Rs 44 a kg in Bangalore today. It, however, remained expensive in
Shimla and Itanagar at Rs 60 a kg respectively, it said. General secretary of Azadpur
based Tomato Merchants Association, Subhash Chugh said supply of the crop
picked up today. More than 20 trucks (each carrying 8-9 tonnes) loaded with tomato
reached Azadpur today, he said adding no truck headed for export to Pakistan, as
the vegetable fetched good price at home itself. Meanwhile, out of the 200 tonnes
of onion to be imported from Pakistan, 180 tonnes had reached Mundra port in
Gujarat on last Friday. The stock has now reached Delhi, official sources said. While,
a portion of the imported onion from the neighbouring country was made available
to agri-cooperative Nafed, the remaining were auctioned in the Azadpur market at a
rate of 26.90 per kg, the sources added.

Alleging that a cartel was behind the sky-rocketing prices of onions in the country, BJP national
secretary Kirit Somaiya today demanded that the Centre order a CBI probe into the "onion price
rigging scam".

"The manipulation and rigging of prices of onions on December 20, 2010 at Lasalgaon, Nasik, the
biggest onion market of Asia, shows the working of the cartel. Onion, which was sold at Rs 12 per kg
in the wholesale market on that day went up to Rs 63 per kg later on the same day," he said,
addressing a meeting of BJP leaders and workers here.

Maintaining that the farmers and onion producers were paid only Rs 12-18 per kg, he alleged that
the price rigging pushed the retail prices in the country to Rs 80. "The major crop of onion in Nasik
arrives in April and stored by big traders and cartel members. The stock is supplied for the next 9-10
months. The onions sold at Rs 80 were from the old stock. The big people jacked up prices by
creating the scare of shortage and minted Rs 1100 crore," he claimed.
The BJP leader demanded that the Centre order a CBI probe to bring out the truth about who are the
members of the cartel, who benefited from the price rise among other issues.

He also said that the BJP would let the Union Budget be presented but would stall the house until a
JPC is appointed on the 2G issue, he said.