Consider the following statements about inflation in India:

1. Retail headline inflation in India is measured using the Consumer Price Index (CPI).
2. Wholesale Price Index (WPI) inflation includes services.
3. The inflation target is 4% +/- 2% under the monetary policy framework of India.

Which of the above statements are correct?

Show answer and explanation

Correct answer: (a) Statements 1 and 3 are correct

Explanation

Statement 1 is correct: retail (headline) inflation is measured by the Consumer Price Index (CPI), compiled by the National Statistical Office.
Statement 2 is wrong: the Wholesale Price Index (WPI), compiled by the Office of the Economic Adviser (DPIIT), covers goods only: primary articles, fuel and power, and manufactured products. It does not include services.
Statement 3 is correct: under the flexible inflation targeting framework (since 2016), the CPI inflation target is 4%, with a band of ±2%, set by the government in consultation with the RBI.