UPSC Prelims 2020 · GS Paper I
Question 67: Economy and Social Development
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 ?
AnswerUPSC’s answer is (a).
Food carries a heavier weight in the Consumer Price Index (about 46 per cent in the 2012 base series) than in the Wholesale Price Index, so statement 1 is right. WPI tracks the prices of goods only, while CPI includes services, so statement 2 is right. Since 2016 the RBI has used CPI as its inflation target under the flexible inflation targeting framework, so statement 3 is wrong.
- 1. Food has a higher weight in CPI than in WPI.
- 2. WPI covers goods only, while CPI includes services.
- 3. The RBI targets CPI inflation, not WPI.
How you could have got this
- If you were sure statement 1 is correct, (b) and (c) go: each of them leaves 1 out.
What you needed to know: Food has a higher weight in CPI than in WPI.
- Then, if you were sure statement 3 is not correct, (d) goes: it includes 3.
What you needed to know: The RBI targets CPI inflation, not WPI.
Only (a) is left. You didn’t need statement 2.
Which options go is worked out from UPSC’s key and the options, not by a model.
Why each option is right or wrong
- (a) Right: statements 1 and 2.
- (b) Wrong: statement 1 is also correct.
- (c) Wrong: the RBI uses CPI, not WPI, as its key measure.
- (d) Wrong: includes statement 3, which is false.
Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2020, General Studies Paper I, Series A. The paper on upsc.gov.in.