UPSC CSE Prelims
Question 83
Consider the following statements:
- The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI).
- The WPI does not capture changes in the prices of services, which CPI does.
- Reserve Bank of India has now adopted WPI as its key measure of inflation and to decide on changing the key policy rates.
Which of the statements given above is/are correct?
View correct answer and explanation
Correct answer: A
Correct Option: A (1 & 2 only)
Explanation: Consumer inflation is more food-weighted and covers services, whereas Indian WPI covers goods at wholesale stages. RBI’s monetary policy targets CPI (combined), not WPI.
Statement / Pair / Item-wise Analysis:
1. Correct - Food carries a larger weight in CPI than in WPI under the relevant base series.
2. Correct - Indian WPI excludes services, which CPI captures through household expenditures.
3. Incorrect - India’s flexible inflation-targeting framework uses CPI Combined as the key inflation measure.
Option-wise Analysis:
A. Correct-includes all and only valid statements/items 1, 2.
B. Incorrect-omits correct item 1 (Food carries a larger weight in CPI than in WPI under the relevant base series).
C. Incorrect-includes incorrect item 3 (India’s flexible inflation-targeting framework uses CPI Combined as the key inflation measure); omits correct item 1 (Food carries a larger weight in CPI than in WPI under the relevant base series); omits correct item 2 (Indian WPI excludes services, which CPI captures through household expenditures).
D. Incorrect-includes incorrect item 3 (India’s flexible inflation-targeting framework uses CPI Combined as the key inflation measure).