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?

[UPSC Civil Services Exam – 2020 Prelims]

(a) 1 and 2 only

(b) 2 only

(c) 3 only

(d) 1, 2 and 3

Answer: (a)        

Explanation:

The weightage of items in WPI is as follows-

• Primary article – 22.62 %
• Fuel and Power – 13.51 %
• Manufactured goods – 64.23 %

While weightage of items in CPI is as follows-

• Food and Beverages – 45.86
• Housing – 10.07
• Fuel and Light – 6.84
• Clothing and Footwear – 6.53
• Pan, tobacco and intoxicants – 2.38
• Miscellaneous – 28.32