The uses of cost of living index number are as follows :
- Cost of living Index number provides a realistic picture of the economic position of different class of people. Hence, it is useful to decide wages, dearness allowance, bonus as well as to suggest changes in other allowances to be paid to that class of people.
- It provides the guidance to the government for deciding on which items, control should levied and which items should be kept free.
- It helps the government in divising the taxation policy. If tax is levied on any item then this index number enables the government to infer about its possible impact on the standard of living of the different class of people.
- It is used to measure the changes in purchasing power of money and to know the real earning ability of the earning person.
- It is useful to the government and other public institutions to determine about the type of facilities and incentives to be given to different classes of people to raise their standard of living.