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?
Detailed Explanation:
Answer: Option 1 — 1 and 2 only
This question tests understanding of the structural differences between CPI and WPI, and the RBI's monetary policy framework. Statements 1 and 2 correctly identify key distinctions between these price indices, while Statement 3 contains a factual error about RBI's policy choice.
✅ Statement 1 – Correct: Food and Beverages constitute approximately 45.86% of the CPI (Combined, Base Year 2012), whereas food items account for only about 24.38% of the WPI (Base Year 2011-12), reflecting the higher weightage of food in CPI.
✅ Statement 2 – Correct: The WPI measures prices of goods at the wholesale level and excludes services entirely, while the CPI captures price changes in both goods and services (healthcare, education, transportation, recreation) as consumed by households.
❌ Statement 3 – Incorrect: Following the Urjit Patel Committee recommendations, the RBI officially adopted CPI (Combined) as its primary measure of inflation for monetary policy and interest rate decisions in April 2014, not WPI.
Question 1 of 1 CPI and WPI
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