Q67. Consider the following statements:
- The weightage of food in Consumer The Price Index (CPI) is higher than that in
Wholesale Price Index (WPI). - The WPI does not capture changes in the prices of services, which the CPI does.
- Reserve Bank of India has now adopted WPI as its key measure of inflation and to change the
key policy rates.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 only
(c) 3 only
(d) 1, 2 and 3
Answer: A
- Statement 1 is correct: The weightage of items in CPI is based on average household expenditure taken from consumer expenditure surveys. The weightage of food in CPI is far higher (approx. 46%) than in WPI (approx. 24%). A significant proportion of the WPI items basket represents manufacturing inputs and intermediate goods like minerals, basic metals, machinery, etc.
- Statement 2 is correct: CPI captures the changes in price levels of both goods and services. However, WPI only captures changes in goods and not in services.
- Statement 3 is not correct: In April 2014, the RBI adopted the CPI or retail inflation as a key measure of inflation to set the monetary and credit policy
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