- Statement 1: The weightage of food in Consumer Price Index (CPI) is indeed significantly higher than its weight in the Wholesale Price Index (WPI) in India. CPI basket reflects typical household consumption patterns where food items constitute a large share of expenditure, while WPI tracks prices at the wholesale level which includes manufactured products, fuel, power, and primary articles (including food). - Statement 2: WPI primarily measures price changes of goods traded in wholesale markets. CPI measures price changes of a basket of goods and services consumed by households. Therefore, WPI does not capture changes in the prices of services, while CPI does. - Statement 3: The Reserve Bank of India (RBI) officially adopted the Consumer Price Index (Combined) (CPI-C) as its key measure for inflation targeting and monetary policy decisions following the recommendations of the Urjit Patel Committee in 2014. Prior to this, WPI was more commonly used, but now CPI is the primary target variable for inflation.
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 ?
Asked in UPSC IAS 2020 · Topic: Money & Banking (Inflation: Types, Causes, Effects, and Monetary Policy Responses)
More Economic Development questions
- With reference to Indian economy, demand-pull inflation can be caused/increased by which of the following? Expansionary policies Fiscal stimulus Inflation-indexing wages Higher purchasing power Rising interest rates Select the correct answer using the code given below.
- Expansionary policies (monetary or fiscal) increase the money supply or government spending/ reduce taxes, leading to higher aggregate demand. 2. Fiscal stimulus is a type of expansionary fiscal policy specifically aimed at boosting demand. 4. Higher purchasing power means consumers and businesses have more ability and willingness to spend, directly increasing aggregate demand. 3. Inflation-indexing wages can contribute to persistent inflation by maintaining demand and fueling a wage-price spiral, but it's often discussed in the context of cost-push or inertial inflation as well. However, maintaining purchasing power supports demand. 5. Rising interest rates reduce borrowing and spending, thus decreasing aggregate demand, which is the opposite of what causes demand-pull inflation. Given the options, {1, 2, 4} represent the most direct and clear drivers of demand-pull inflation. Statement 3 is debatable in its primary classification but does support demand. Statement 5 directly reduces demand. 368. Which one of the following is likely to be the most inflationary in its effects?
- The term 'inflation' refers to the increase in
- The index that measures the average change in the prices of goods and services consumed by urban households is called
- Core CPI inflation is generally lower than headline CPI inflation because
- The rate of inflation is the rate of change of general price level which is measured as
- Inflation in India is
- Inflation is