Which one of the following indices is now used by the Reserve Bank of India to measure the rate of inflation in India?
- A.NASDAQ Index
- B.BSE Index
- C.Consumer Price Index
- D.Wholesale Price Index
Correct answer
Explanation
The correct answer is C, Consumer Price Index. The RBI uses all-India CPI (Combined) inflation as the measure for its monetary policy.
For a long time the Wholesale Price Index was India's headline inflation measure. In 2014 the Urjit Patel Committee recommended that the RBI target consumer price inflation, since CPI reflects the prices households actually pay, including food and services. The RBI adopted CPI (Combined) as its nominal anchor, and the 2016 amendment to the RBI Act gave this a legal basis through flexible inflation targeting and the Monetary Policy Committee. CPI (Combined) is compiled by the National Statistics Office under the Ministry of Statistics and Programme Implementation.
Option A is wrong because NASDAQ is a stock market index of the United States, not a price index. Option B is wrong because the BSE Sensex tracks share prices on the Bombay Stock Exchange. Option D is wrong because the RBI moved away from WPI as its policy measure, though WPI is still published by the Office of the Economic Adviser.
Exam tip: RBI targets CPI (Combined) inflation; WPI was replaced as the anchor in 2014.
Practice Questions
View allUBI, as an alternative for subsidies in poverty alleviation, stands for
- A.Union Basic Income
- B.Undefined Basic Income
- C.Unconditional Basic Income
- D.Universal Basic Income
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UBI is the idea of paying every citizen a fixed sum of money regularly, without conditions, in place of a large number of separate subsidies and welfare schemes.
Read the full explanation →Who among the following is the Chairman of the Fourteenth Finance Commission?
- A.C. Rangarajan
- B.Vijay Kelkar
- C.Y. V. Reddy
- D.Rakesh Mohan
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The Fourteenth Finance Commission, set up in 2013 for the award period 2015-2020, was chaired by Y. V. Reddy, a former Governor of the Reserve Bank of India.
Read the full explanation →Why was constitutional amendment needed for introducing GST?
- A.States were not willing to agree with the Union for introduction of GST without amendment in the Constitution.
- B.GST was to be implemented on concurrent base and Article 246 was inadequate for such a case.
- C.The Empowered Committee of Finance Ministers had recommended for constitutional amendment.
- D.The GST Council had recommended for constitutional amendment so that its power enhances.
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GST is levied by the Union and the States together on the same supply, and Article 246, which splits taxing powers between them through separate lists, did not allow such a concurrent tax.
Read the full explanation →In India, the term 'hot money' is used to refer to
- A.Currency + Reserves with the RBI
- B.Net GDR
- C.Net Foreign Direct Investment
- D.Foreign Portfolio Investment
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Hot money is foreign capital that flows in quickly to earn short-term returns and can leave just as quickly, and in India this describes portfolio investment in shares and bonds.
Read the full explanation →Which one of the following statements is correct with respect to the composition of national income in India?
- A.The share of manufacturing sector has declined.
- B.The share of services sector has increased sharply.
- C.The share of agriculture has remained static.
- D.The share of services sector has declined.
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Since independence, and especially since the reforms of 1991, the services sector has grown faster than the rest of the economy and now produces more than half of India's gross value added.
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