Question map
Not attempted Correct Incorrect ★ Bookmarked
Loading…
Q67 (CDS-I/2025) Economy › Money, Banking & Inflation › Inflation measurement Answer Verified

Core inflation is :

Result
Your answer: —  Â·  Correct: C
Explanation

Core inflation is a measure of inflation that excludes volatile categories to analyze underlying price trends. It is specifically defined as headline inflation minus the impact of food and energy (fuel and power) products [2]. While headline inflation reflects the total inflation in an economy, core inflation is considered more stable because it removes temporary price shocks associated with seasonal food items and global energy price fluctuations [3]. In the Indian context, the Reserve Bank of India (RBI) shifted its focus from the Wholesale Price Index (WPI) to the Consumer Price Index (CPI) Combined for anchoring monetary policy [2]. Consequently, core inflation is typically calculated using CPI data by stripping away the food and fuel components to provide a clearer picture of long-term inflation trends [3]. This helps policymakers distinguish between transient price spikes and persistent inflationary pressures [2].

Sources

  1. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 4: Inflation > PRODUCER PRICE INDEX > p. 69
  2. [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 4: Inflation > CPI or WPI as the Nominal Anchor for Inflation Targeting > p. 73
  3. [3] https://www.rba.gov.au/publications/bulletin/2014/sep/5.html
How others answered
Each bar shows the % of students who chose that option. Green bar = correct answer, blue outline = your choice.
Community Performance
Out of everyone who attempted this question.
58%
got it right
✓ Thank you! We'll review this.

SIMILAR QUESTIONS

IAS · 2020 · Q37 Relevance score: 2.45

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 ?

CDS-II · 2024 · Q57 Relevance score: 0.39

If the price index increased from 100 in 2021 to 110 in 2022 to 132 in 2023, then the rate of inflation is: (a) 10% (b) 32% (c) 20% (d) Cannot be determined

CDS-II · 2024 · Q74 Relevance score: 0.19

The Rangarajan Committee methodology for determining the poverty line incorporated which of the following? 1. A food component 2. A normative level of expenditure for essential non-food items 3. A behaviourally determined expenditure for other non-food items Select the answer using the code given below : (a) 1 and 2 only (b) 2 and 3 only (c) 1, 2 and 3 (d) 1 and 3 only

IAS · 2010 · Q115 Relevance score: 0.17

With reference to India, consider the following Statements: 1. The Wholesale Price Index (WPI) in India is available on a monthly basis only 2. As compared to Consumer Price Index for Industrial Workers (CPI (IW)), the WPI gives less weight to food articles. Which of the statements given above is/are correct?