gs1medium

Consider the following statements:

  1. 1.The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI).
  2. 2.The WPI does not capture changes in the prices of services, which CPI does.
  3. 3.The 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?

  1. A.1 and 2 only
  2. B.2 only
  3. C.3 only
  4. D.1, 2 and 3
▶ Answer & Explanation

Correct answer: A. 1 and 2 only

The Consumer Price Index (CPI) gives greater importance to food items compared to the Wholesale Price Index (WPI), reflecting household spending patterns more accurately. Furthermore, CPI includes prices of services, which are a significant component of consumer expenditure, whereas WPI primarily tracks prices of goods at the wholesale level and excludes services. The Reserve Bank of India uses the CPI as its primary measure for monetary policy decisions.

Source: UPSC gs1 2020

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