Inflation: WPI & CPI — Set 1

Correct Answer: B. B. Sustained rise in the general price level of goods and services

Inflation is a sustained rise in the general price level of goods and services in an economy over time. It results in a reduction in the purchasing power of money. Mild inflation (2-4%) is generally considered healthy for an economy, stimulating growth, while very high inflation is damaging.

Correct Answer: A. A. Consumer Price Index

CPI stands for Consumer Price Index. It measures the change in the average price of a fixed basket of goods and services typically consumed by urban and rural households. In India, CPI is the official inflation measure for monetary policy since 2014, targeting 4% ±2%.

Correct Answer: B. B. Wholesale Price Index

WPI stands for Wholesale Price Index. It measures the change in prices of goods at the wholesale (producer) level, before they reach consumers. India's WPI uses 2011-12 as the base year and covers 697 commodities. It is published by the Department for Promotion of Industry and Internal Trade (DPIIT).

Correct Answer: C. C. 2012

India's Consumer Price Index (CPI) uses 2012 (calendar year) as the base year, where CPI = 100. The CPI with base year 2012 was introduced in January 2015, replacing the earlier CPI with base year 2010. The index measures inflation relative to the price level in 2012.

Correct Answer: B. B. 2011-12

India's Wholesale Price Index (WPI) uses 2011-12 as the base year. The base year was revised from 2004-05 to 2011-12, effective from April 2017. The new series covers 697 commodities across primary articles, fuel & power, and manufactured products. DPIIT publishes the WPI monthly.

Correct Answer: C. C. NSO/MOSPI

India's Consumer Price Index (CPI) is published by the National Statistical Office (NSO) under MOSPI. NSO releases CPI data for urban, rural, and combined (all-India) categories. The CPI data is released monthly with a one-month lag and is the primary inflation indicator for the RBI's Monetary Policy Committee.

Correct Answer: C. C. DPIIT

India's Wholesale Price Index (WPI) is published by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry. WPI data is released monthly, typically with a 2-week lag for provisional data and 2-month lag for final data. It covers wholesale-level price movements.

Correct Answer: C. C. Food and Beverages (45.86%)

Food and Beverages is the largest component of India's CPI basket at 45.86% weight. This high weight reflects the significant share of household income spent on food in India. The large food weight means food price inflation (especially vegetables, cereals, pulses) has an outsized impact on India's headline CPI.

Correct Answer: B. B. 10.07%

Housing has a weight of 10.07% in India's CPI basket. It covers rent and housing-related expenditure. The housing component captures changes in rental costs faced by urban households. In India's CPI, housing weight is only for urban areas; rural CPI does not include a housing component.

Correct Answer: B. B. 6.84%

Fuel & Light has a weight of 6.84% in India's CPI basket. It covers firewood, chips & dung cake, LPG, kerosene, electricity, and other energy sources. Rising fuel prices significantly impact household budgets in India, particularly for cooking and lighting among lower-income groups.