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?

QUESTION

Easy

Economy

Prelims 2020

Consider the following statements:

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

Select an option to attempt

Explanation

Statement 1 is Correct: The weightage of 'Food and Beverages' in the Consumer Price Index (CPI-Combined) is approximately 45.86% (Base Year 2012). In contrast, the weightage of food items in the Wholesale Price Index (WPI) is significantly lower, with Food Articles and Food Products together accounting for about 24.38% (Base Year 2011-12).

Statement 2 is Correct: The WPI tracks the price of goods traded at the wholesale level and does not include the services sector. The CPI, however, captures price changes in both goods and services (such as medical care, education, and recreation) consumed by households.

Statement 3 is Incorrect: Based on the recommendations of the Urjit Patel Committee, the Reserve Bank of India (RBI) officially adopted CPI (Combined) as its key measure of inflation for monetary policy and interest rate decisions in April 2014, replacing the WPI.

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