A consumer price index (CPI) is a measure of the average price of consumer goods and services purchased by households. It is one of several price indices calculated by national statistical agencies. The percent change in the CPI is a measure of inflation. The CPI can be used to index (i.e., adjust for the effects of inflation) wages, salaries, pensions, or regulated or contracted prices. The CPI is, along with the population census and the National Income and Product Accounts, one of the most closely watched national economic statistics.
India's CPI is published by Ministry of Statistics and Programme Implementation's Central Statistical Organisation
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Ministry of economics and statistics do this computation. It is based on price indicators ( price of basic need items like raw cloth, tea powder, common rice etc) and price inticator cities, townships etc)