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Difficulty: MediumInflation Types, Price Indices (CPI, WPI), and Price Control Mechanisms

Match the inflation types and phenomena in List-I with their corresponding economic descriptions in List-II:

  • Headline InflationComprehensive measure of total price rise in an economy, including food and energy items
  • Core InflationUnderlying price movement excluding volatile components like food and fuel
  • Repressed InflationExcess demand scenario where open price increases are prevented by price ceilings or rationing
  • SkewflationPersistent price rise concentrated predominantly in one or a few commodity groups

Answer

Headline Inflation matches with the total price rise measure inclusive of food and energy; Core Inflation matches with price movements excluding volatile food and fuel items; Repressed Inflation matches with demand-driven pressures suppressed by statutory price controls; Skewflation matches with price increases concentrated in specific commodity groups.
Each term in List-I correctly matches its definition in List-II: Headline Inflation measures overall price levels including food and fuel; Core Inflation excludes volatile components; Repressed Inflation involves administrative price limits holding down prices despite high demand; and Skewflation is sector-specific price inflation.

Step-by-Step Solution

1
Analyze the broad measure of inflation across all consumer items
Headline Inflation accounts for price changes across the entire economy, including volatile food and energy products.
It represents the raw figure produced directly by price indices like CPI without adjusting for volatility.
2
Identify the underlying inflation measure used for monetary policy evaluation
Core Inflation strips out short-term volatile items (food and fuel) to measure long-term price dynamics.
Central banks track core inflation to gauge persistent demand pressures.
3
Examine inflation suppressed by government price intervention
Repressed Inflation describes a situation where prices are artificially kept low by government regulation or rationing despite market shortages.
Administered pricing mechanisms prevent open price inflation from being recorded in price indices.
4
Differentiate sector-specific price spikes from general inflation
Skewflation refers to price increases skewed toward one or a few goods (e.g., pulses or vegetables) while other commodity prices remain steady.
It reflects localized supply bottlenecks rather than generalized macroeconomic inflation.

Key Concept

Inflation Classifications and Price Dynamics
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Topics

Inflation Types, Price Indices (CPI, WPI), and Price Control Mechanisms