Index Numbers | Class 11 Economics Notes

4. SOME IMPORTANT INDEX NUMBERS

This section describes various important index numbers widely used in economic analysis and policy-making. It begins with the Consumer Price Index (CPI), also known as the cost of living index, which measures average changes in retail prices faced by consumers. The CPI indicates how much money a consumer needs in the current period to purchase the same basket of goods as in the base period. An example calculation shows how to compute CPI using weighted price relatives and interpret index values relative to 100. The section lists several CPI variants prepared by government agencies in India, such as those for industrial workers, agricultural labourers, rural and urban consumers, with their respective base years and recent index values. It explains the basket composition and weights used in the All-India Combined Consumer Price Index, highlighting major groups like food, clothing, housing, and fuel. The Consumer Food Price Index (CFPI) is noted as a subset excluding alcoholic beverages and prepared meals. Next, the Wholesale Price Index (WPI) is introduced as an index measuring general price level changes at the wholesale level, excluding services. The WPI base year and recent values are given, along with the main commodity groups and their weights. The section explains the concept of headline inflation (all commodities) and core inflation (manufactured goods excluding food and fuel). The Index of Industrial Production (IIP) is then described as a quantity index measuring changes in industrial output, with base year, formula, and sectoral weights provided. The section also mentions the Human Development Index (HDI) as a broader development measure and introduces Sensex as a stock market index representing 30 leading companies across sectors, reflecting investor confidence and economic health. The section emphasizes the practical significance of these indices in understanding economic conditions and guiding decisions.

📊 Diagram: Includes tables showing weights and price data for CPI basket items, sectoral weights for WPI and IIP, and a graphical representation of Sensex with company sectors. These visuals illustrate composition and calculation of indices.

🔗 Connection: Leads to the next section discussing issues and challenges in constructing index numbers.