India’s inflation based on consumer price index (CPI) rose to 7.65% in January, according to the first official nationwide retail inflation data, released on Tuesday.
The CPI is aimed at better reflecting actual changes in cost of living that would aid macroeconomic managers to prescribe policies based on more appropriate data. The index incorporates the price of several key services including telephone bills, education and recreation to mirror current day lifestyles.
Central banks across the world rely mostly on CPI data to decide monetary policy, unlike Reserve Bank of India, which uses the Wholesale Price Index (WPI) as the key inflation index.
In a 2009 report of a committee on financial sector assessment, chaired by then deputy governor Rakesh Mohan, RBI had said switching over to CPI as the only inflation indicator is not an immediate imperative. “Relying on a single index might result in loss of information on some crucial sectors and might be less useful in tackling the diversity of issues,” the report had said.
Inflation, as measured by the WPI touched 8.23% in January.