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Difficulty: MediumEconomic Developments, Union & State Budgets, and Economic Surveys

With reference to the inflation tracking indicators and price index frameworks evaluated in Indian Economic Surveys, consider the following statements:

1. The weight assigned to food and beverages in the Consumer Price Index (CPI-Combined) is substantially higher than the total weight of food articles and products in the Wholesale Price Index (WPI).
2. The Wholesale Price Index captures price movements in the service sector, whereas the Consumer Price Index measures only physical commodities.
3. The Wholesale Price Index is compiled and released by the Office of the Economic Adviser (Ministry of Commerce and Industry), while CPI-Combined is released by the National Statistical Office (NSO).

Which of the statements given above are correct?

  1. A
    1 and 2 only
  2. 1 and 3 onlyAnswer
  3. C
    2 and 3 only
  4. D
    1, 2 and 3

Answer

Statements 1 and 3 are correct.
The statement set '1 and 3 only' is correct. Food items carry a weight of ~45.86% in CPI-Combined versus ~24.4% in WPI. Furthermore, WPI is published by the Office of the Economic Adviser (Ministry of Commerce & Industry) and CPI is published by NSO (MoSPI). Statement 2 is incorrect because WPI excludes services altogether.

Step-by-Step Solution

1
Evaluate Statement 1 regarding food weightage in CPI vs WPI.
In CPI-Combined (base year 2012), 'Food and Beverages' accounts for approximately 45.86% of the basket. In WPI (base year 2011-12), primary food articles (~15.26%) and manufactured food products (~9.17%) together constitute about 24.4%. Thus, food weight is higher in CPI.
Consumer baskets reflect household expenditure where food forms a major component, whereas wholesale baskets reflect producer and commercial trade structures.
2
Evaluate Statement 2 regarding service sector coverage.
WPI tracks price changes only for physical commodities (Primary Articles, Fuel & Power, and Manufactured Products) and does not cover services. CPI includes services such as health, education, transport, housing, and personal care.
Wholesale transactions focus on bulk physical goods, whereas consumer expenditure covers both goods and services.
3
Evaluate Statement 3 regarding compiling and publishing agencies.
WPI is released monthly by the Office of the Economic Adviser, Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry. CPI-Combined is released monthly by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI).
Different administrative bodies manage wholesale and consumer price statistics based on their institutional mandates.

Key Concept

Methodological differences between CPI and WPI in India
Estimated Time:1m 30s
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Topics

Economic Developments, Union & State Budgets, and Economic Surveys

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