Consider the following statements: The weightage of food in Consumer Price Index (CPI) is higher than that 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? 1 and 2 only 2 only 3 only 1, 2 and 3

The weightage of food in Consumer Price Index

Consider the following statements:

The weightage of food in Consumer Price Index (CPI) is higher than that 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?

1 and 2 only
2 only
3 only
1, 2 and 3

Answer: A

Explanation

WPI is the price of representative basket of wholesale goods. While the CPI is a comprehensive measure, used for estimation of price changes in a basket of goods and services representative of consumption expenditure in an economy.

Food weight in WPI is 18.8% which is part of primary products, While CPI has 50% weight for food. So statement 1 is correct.

The Reserve Bank of India (RBI) Governor in 2014 adopted the new Consumer Price Index (CPI) (combined) as the key measure of inflation.

Exam Year: 2020