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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 and its key measures of inflation and to decide on changing the key policy rate

Which of the statements given above is/are correct?

(a) 1 and 2 only
(b) 2 only
(c) 3 only
(d) 1, 2 and 3



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1. This means that the CPI gives more importance to food prices when calculating the average price changes experienced by consumers, reflecting their spending patterns.

2. The WPI focuses on wholesale prices of goods and does not adequately capture price changes in services. On the other hand, the CPI considers a broader range of goods and services consumed by households, providing a more comprehensive measure of inflation.

3. Statement 3 is incorrect: The RBI primarily relies on the CPI as the key measure of inflation when making decisions about changing the key policy rate. The CPI is considered a better reflection of the inflation experienced by households, guiding the RBI's monetary policy decisions.

Statements 1 and 2 are correct as the weightage of food is higher in the CPI than the WPI, and the WPI does not capture changes in service prices while the CPI does. The RBI primarily uses the CPI, not the WPI, to make decisions on changing the key policy rate.


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