The Consumer Price Index for Industrial Workers (CPI-IW) is an economic indicator used by the government in India to track inflation for a particular segment of the consumer market. It does this by establishing a baseline for the purchasing power of industrial workers at a particular point in time and comparing what the same amount of money can purchase in later years. If purchasing power decreases, inflation has caused the prices of consumer goods to rise. The percentage increase in prices over the baseline is considered the country's rate of inflation.
Tracking CPI is part of the economic policy of most nations. Highly developed countries, such as the US and UK, track CPI for the entire population. Developing countries, such as India, find it less useful to track the purchasing habits of the entire population as a whole, because there is such a big disparity in the standard of living between urban and rural workers. India segments its population into four classes for purposes of computing CPI: urban non-manual employees, agricultural laborer, rural laborer and industrial worker.
This segmentation allows India to focus the world's attention on the economic activity of its most productive urban workers. CPI-IW is tracked by India's Department of Labor, and measures the purchasing ability 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 ways of tracking it. Uncontrolled price increases lowers the standard of living and makes it more expensive for businesses to pay for labor and compete in the global marketplace.
If CPI-IW indicates that inflation is rising, the Indian government can change its economic and fiscal policies to try to reign in prices. The government will often try lowering the interest rate on public debt or pumping 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 CPI-IW can have catastrophic effects on the ability of people 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 type of change in economic status can cause civil unrest and make it difficult for existing government officials to push through reforms. Further, some developing countries have outstanding foreign debt. Any change in economic conditions can effect the country's ability to make debt payments.