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Q95 (CAPF/2013) Economy › Money, Banking & Inflation › Inflation measurement Answer Verified

The rate of inflation in India is measured generally in respect of movement of

Result
Your answer: —  Â·  Correct: A
Explanation

The correct answer is Option 1: Consumer Price Index (CPI).

Historically, India used the Wholesale Price Index (WPI) as the primary measure of inflation. However, following the Urjit Patel Committee recommendations, the Reserve Bank of India (RBI) shifted to the CPI (Combined) as the key metric for its monetary policy framework in 2014. This shift occurred because CPI reflects the actual change in the cost of living for households, capturing the prices of services and retail goods that consumers directly pay for.

  • Option 2: WPI measures price changes at the producer/wholesale level and excludes services, making it less representative of the common man's inflation.
  • Option 3: This is a specific subset of CPI used for wage indexing in agriculture, not for general national inflation.
  • Option 4: Money supply is a cause or driver of inflation, not a metric to measure the rate of price movement itself.

Thus, CPI is currently the standard benchmark for measuring headline inflation in India.

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SIMILAR QUESTIONS

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Which one of the following indices is now used by the Reserve Bank of India to measure the rate of inflation in India?

CDS-II · 2009 · Q86 Relevance score: 1.72

Consider the following statement about wholesale Price index (WPI) I. It captures the price movement extensively and is, therefore, taken as an indicator of inflation. II. The office of the Economic adviser (OEA) is entrusted with the function of compilation and publication of the weekly wholesale price index number in India. Which of the statements given above is/are cocrrect?

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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: 0.52

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