GS PrelimsEconomyInflation1997

In India, inflation is measured by the

A

Wholesale Price Index Number

B

Consumers Price Index for urban non-manual workers

C

Consumers Price Index for agricultural workers

D

National Income deflation

Correct Answer: Option A

Explanation

1. Inflation is the rate of increase in the general price level of goods and services. 2. In India, for macroeconomic analysis and policy-making purposes during the period including 1997, the headline rate of inflation was primarily measured by the Wholesale Price Index (WPI) Number. 3. The WPI reflects price changes of goods at the wholesale level before they reach the consumer. 4. Various Consumer Price Index (CPI) numbers existed (CPI for agricultural workers, CPI for industrial workers, CPI for urban non-manual workers) and were used for specific purposes like calculating dearness allowance, but WPI was the most commonly cited measure for overall inflation. 5. The National Income deflator (GDP deflator) is a broader measure but calculated less frequently. (Note: Since 2014, CPI-Combined has become the main inflation metric for monetary policy).

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