UPSC Prelims Practice Questions — Why inflation is rising in India

Q1. The Wholesale Price Index (WPI) in India is compiled and released by which one of the following?

  • A. Office of the Economic Adviser, Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry
  • B. National Statistical Office, Ministry of Statistics and Programme Implementation
  • C. Directorate General of Commercial Intelligence and Statistics, Ministry of Commerce and Industry
  • D. Department of Economic Affairs, Ministry of Finance

Q2. Under the new Wholesale Price Index series (base year 2022-23), the Service Producer Price Index (Service PPI) has been introduced for how many service sectors?

  • A. 5 service sectors
  • B. 7 service sectors
  • C. 9 service sectors
  • D. 12 service sectors

Q3. With reference to India's inflation data for June 2026, consider the following statements: 1. WPI inflation stood at 9.87%, a 27-month high. 2. Retail (CPI) inflation stood at 4.38%. 3. WPI Fuel and Power inflation stood at 27.41%. 4. The WPI Food Index eased to 4.49% during the month. Which of the statements given above is/are NOT correct?

  1. WPI inflation stood at 9.87%, a 27-month high.
  2. Retail (CPI) inflation stood at 4.38%.
  3. WPI Fuel and Power inflation stood at 27.41%.
  4. The WPI Food Index eased to 4.49% during the month.
  • A. 1 and 2 only
  • B. 4 only
  • C. 3 and 4 only
  • D. 2 only

Q4. In commentary on the June 2026 CPI figure, the term 'headline inflation' most precisely refers to which one of the following?

  • A. The overall inflation rate covering all items in the CPI basket, including food and fuel
  • B. Inflation computed after permanently excluding all food and fuel items from the basket
  • C. Inflation in only the single most heavily weighted item of the basket
  • D. The highest inflation rate recorded among all sub-groups in that month

Q5. The framework that treats prices of primary commodities as demand-determined while prices of industrial goods are cost-determined is most closely associated with which economist?

  • A. Michał Kalecki
  • B. Milton Friedman
  • C. John Maynard Keynes
  • D. Joan Robinson

Q6. In economic theory, 'cost-push inflation' is best described as which one of the following?

  • A. A rise in the general price level driven by higher input costs such as fuel and raw materials, even without excess aggregate demand
  • B. A rise in the general price level driven by aggregate demand persistently exceeding the economy's productive capacity
  • C. A rise in prices caused solely by expansion of the money supply by the central bank
  • D. A fall in the general price level caused by rising productivity and cheaper imported inputs

Q7. The administrative purview over pricing and import of crude oil and petroleum products in India lies primarily with which Union Ministry?

  • A. Ministry of Petroleum and Natural Gas
  • B. Ministry of Commerce and Industry
  • C. Ministry of Power
  • D. Ministry of Coal

Q8. During the 2026 West Asia conflict, the threat to global crude supply centred on the possible closure of which strait, through which nearly one-fifth of the world's oil trade passes?

  • A. Strait of Hormuz
  • B. Strait of Malacca
  • C. Bab-el-Mandeb Strait
  • D. Strait of Gibraltar

Q9. With reference to petrol and diesel pricing in India, consider the following statements: 1. Petrol prices were deregulated in 2010. 2. Diesel prices were deregulated in 2014. 3. A dynamic (daily) fuel pricing system has been in place since 2017. 4. Retail petrol and diesel prices are fixed directly by the Petroleum Planning and Analysis Cell every fortnight. Which of the statements given above is/are NOT correct?

  1. Petrol prices were deregulated in 2010.
  2. Diesel prices were deregulated in 2014.
  3. A dynamic (daily) fuel pricing system has been in place since 2017.
  4. Retail petrol and diesel prices are fixed directly by the Petroleum Planning and Analysis Cell every fortnight.
  • A. 4 only
  • B. 1 and 2 only
  • C. 3 and 4 only
  • D. 2 only

Q10. By the end of June 2026, the area sown under kharif crops in India was lower than a year earlier by about how much?

  • A. About 12%
  • B. About 22%
  • C. About 33%
  • D. About 43%

Q11. With reference to India's flexible inflation targeting framework, consider the following statements: 1. The inflation target is set by the Central Government in consultation with the RBI. 2. The Monetary Policy Committee has six members and is chaired by the RBI Governor. 3. The current inflation target is 4% with a tolerance band of +/- 2%. 4. The inflation target is defined in terms of the Wholesale Price Index. Which of the statements given above is/are NOT correct?

  1. The inflation target is set by the Central Government in consultation with the RBI.
  2. The Monetary Policy Committee has six members and is chaired by the RBI Governor.
  3. The current inflation target is 4% with a tolerance band of +/- 2%.
  4. The inflation target is defined in terms of the Wholesale Price Index.
  • A. 1 and 3 only
  • B. 4 only
  • C. 2 and 4 only
  • D. 3 only

Q12. Up to December 2025, WPI Fuel and Power inflation in India had remained in decline for how many consecutive months?

  • A. 9 months
  • B. 13 months
  • C. 17 months
  • D. 21 months