Consider the following statements: 1. The weightage of food in Consumer Price Index (CPI) is higher than…
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?
1 and 2 only
2 only
3 only
1, 2 and 3
Solution
Food has 50% weight in CPI vs ~24% in WPI — 1 correct. WPI covers only goods, CPI covers goods and services — 2 correct. RBI shifted to CPI (not WPI) as anchor of monetary policy in 2014 — 3 wrong. Answer: (a) 1 and 2 only.