Prelims 2020 · Economy · Question 77
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
1 and 2 only
1. Correct. Food has a much higher weight in CPI than in WPI; CPI reflects household consumption, where food occupies a large share.
2. Correct. WPI tracks prices of goods only and excludes services, while CPI includes services such as housing, education, health, etc.
3. Incorrect. RBI uses CPI (Combined) as the main inflation target/anchor for monetary policy, not WPI.
Hence, statements 1 and 2 only are correct.