India uses the Consumer Price Index for Industrial Workers (CPI-IW) to track inflation for its most productive urban workers. Inflation can cause reduced living standards and economic recession, so the government may change policies to control it. Rising prices can push people into poverty and cause civil unrest.
The Consumer Price Index for Industrial Workers (CPI-IW) is an economic indicator used by the Government of India to track inflation for a particular segment of the consumer market. It does this by establishing a basis for the purchasing power of industrial workers at one point in time and comparing what the same amount of money can buy in subsequent years. If purchasing power decreases, inflation has caused the prices of consumer goods to rise. The percentage increase in prices from baseline is considered the country’s inflation rate.
Monitoring the CPI is part of the economic policy of most nations. Highly developed countries, such as the United States and the United Kingdom monitor the CPI for the entire population. Developing countries, such as India, find it less useful to track the shopping habits of the entire population as a whole because there is such a large disparity in living standards between urban and rural workers. India divides its population into four classes for the purpose of calculating the CPI: urban non-manual workers, agricultural labourers, rural laborers and industrial workers.
This segmentation allows India to focus the world’s attention on the economic activity of its most productive urban workers. CPI-IW is monitored by the Indian Department of Labor and measures the purchasing power of industrial workers across thousands of consumer products. Inflation is considered bad for a country’s economy, which is why it is so important to have methods for tracking it. Uncontrolled price increases reduce living standards and make it more expensive for businesses to pay for work and compete in the global marketplace.
If CPI-IW indicates that inflation is rising, the Indian government may change its economic and fiscal policies to try to reign over prices. The government will often try to lower the interest rate on government debt or pump government resources into the private sector to control demand. Rampant inflation can lead to an economic recession or depression, which governments typically want to avoid.
For a developing country like India, a change in the IPC-IW can have catastrophic effects on people’s ability to live stable lives. Workers there tend not to make much money, so a rise in prices can push large segments of the population into poverty. This kind of shift in economic status can cause civil unrest and make it difficult for current government officials to advance reforms. Additionally, some developing countries have external debt outstanding. Any change in economic conditions can affect the country’s ability to pay its debts.
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