Inflation leads to a rise in the general price level and a decrease in the purchasing power (value) of money.
Sharp increase in international prices of crude oil: Correct. Global energy prices, especially crude oil, saw a significant surge in 2021-2022 due to recovering demand post-pandemic and later amplified by geopolitical tensions (like the Russia- Ukraine conflict which intensified in early 2022). Since crude oil and petroleum products have a high weight in the WPI index and affect costs across various sectors (transportation, manufacturing inputs), this was a major driver of inflation. 2. Decrease in economic activity post-Covid: Incorrect. Economic activity in India was recovering significantly in 2021-2022 from the depths of the pandemic-induced slowdown. Increased economic activity typically contributes to demand-side inflation, though WPI is more cost-driven. A decrease in activity would likely dampen inflation. 3. Disruption of global supply chain: Correct. The COVID-19 pandemic caused widespread disruptions in global supply chains, leading to shortages of components and finished goods. This mismatch between supply and demand pushed up input costs for producers, directly contributing to higher WPI. 4. High freight cost: Correct. Global shipping and due to supply chain bottlenecks, port congestion, and increased fuel prices. Higher freight costs translate into higher landed costs for imported goods and higher transportation costs for domestic movement, adding to WPI. 335. Due to inflation
Asked in logistics costs increased substantially in 2021 2022 · CGPSC Prelims Exam 2013 · Topic: Money & Banking (Inflation: Types, Causes, Effects, and Monetary Policy Responses)
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