Q77.
Consider the following statements: 1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI). 2. The WPI does not capture changes in the prices of services, which CPI does. 3. 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?
Answer
A
Explanation
Inflation can be described as the general rise in the price of goods and services in an economy over time. It is calculated by tracking the increase in prices of essentials. The Methods To Calculate Inflation CPI • The primary index that tracks the change in retail prices of essential goods and services consumed by Indian households is the Consumer Price Index or CPI. It shows the impact of inflation on people • It is always used for Dearness Allowance. Now, it is also being used for monetary policy formulation. • Since 2010, based on the Rangarajan Committee;s report, CPI (URBAN), CPI (RURAL), CPI (COMBINED) and CFPI- food indice are calculated therein • It covers both goods and services • 200 Goods and services are taken- It is a selected basket of goods and services. The weightage of food in the CPI is close to 50% (The weightage for food is lower in WPI). Hence statement 1 is correct WPI • While retail inflation looks at the price at which the consumer buys the product, WPI is measured based on prices at the wholesale level. WPI measures the changes