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?
Answer & explanation
Answer: (a) 1 and 2 only
Statements 1 and 2 are correct, and 3 is wrong. Food has a far larger weight in CPI (45.86 per cent in the combined index) than in WPI (24.38 per cent), and WPI tracks goods only, so it misses services that CPI includes. The RBI's inflation target is fixed in terms of CPI, not WPI.
- ✓ 1. In CPI (base 2012, combined) food and beverages carry a weight of 45.86 per cent; the WPI Food Index has a weight of 24.38 per cent.
- ✓ 2. WPI covers commodities, and RBI's expert committee noted that it does not capture price movements in services such as those in the CPI basket (housing, health, transport and communication).
- ✗ 3. Under Section 45ZA of the RBI Act the Central Government sets the inflation target in terms of CPI (4 per cent, with a 2 to 6 per cent band, notified in August 2016), and the RBI works to it.
Remember · CPI measures retail prices, has a heavy food weight, includes services and is the RBI's inflation-target anchor. WPI is wholesale prices of goods only, with a lighter food weight.
Sources
- PIB, Index Numbers of Wholesale Price in India for the month of September 2020 (WPI Food Index weight) ↗ “WPI FOOD INDEX ( Weight 24.38%) The Food Index consisting of 'Food Articles' from Primary Articles group and 'Food Product' from Manufactured Products group have increased”
- PIB, Consumer Price Index Numbers on Base 2012=100, May 2021 (weights: rural 54.18, urban 36.29, combined 45.86) ↗ “1 Food and beverages 54.18 155.6 158.7 36.29 162.0 164.2 45.86 158.0 160.7”
- RBI, Report of the Expert Committee to Revise and Strengthen the Monetary Policy Framework (January 2014) ↗ “Furthermore, it does not capture price movements in non-commodity producing sectors like services, which constitute close to two-thirds of economic activity in India.”
- RBI, Monetary Policy: the monetary policy framework ↗ “Under Section 45ZA, the Central Government, in consultation with the RBI, determines the inflation target in terms of the Consumer Price Index (CPI), once in five years and notifies it in the Official Gazette.”
Question and answer: UPSC's official GS Paper I (2020, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·