UPSC PRELIMS · ECONOMICS · INFLATION INDICES — CPI AND WPI
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?
Take a breath. Choose one. Press A–D on your keyboard if you like.
EXPLANATION
CPI gives food a much larger weight than WPI and CPI covers services whereas WPI does not; RBI's inflation target is based on CPI, not WPI.
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