A consumer price index number measures the relative changes in the composite price of a specified basket of goods and services received during the current period as compared with the base period. The so called basket includes various commodities consumed and services received in the base period or in the given period under the headings, food and beverages, clothing and foot wear, fuel and lightning, house rent and services, etc. The consumer price indices indicates the movements in retail prices of consumption goods and services. These movements in prices helps government in formulating its policies and in taking appropriate economic measures. They can be used to re-adjust the wages and to adopt measures of relief by granting dearness allowance and bonus to their employs to meet the increased cost by the industrial and commercial establishments as well as mills. They are also used to deflate the gross national product and wages to arrive at the real values of the national product and real wages.
