UPSC Prelims Practice Questions — ‘Broad-based food price increase seen’

Q1. With reference to the Monetary Policy Committee (MPC) constituted under the RBI Act, 1934, consider the following statements: Which of the statements given above is/are correct?

  1. The inflation target that the MPC works towards is set by the Central Government in consultation with the RBI, not by the MPC itself.
  2. Members appointed by the Central Government can, by voting together, override the RBI's members in a decision on the policy repo rate.
  3. When votes in the MPC are equally divided, the Governor has a second or casting vote.
  • A. 2 and 3 only
  • B. 1 only
  • C. 1, 2 and 3
  • D. 1 and 3 only

Q2. With reference to the Wholesale Price Index (WPI) and the Consumer Price Index (CPI) in India, consider the following statements: Which of the statements given above is/are correct?

  1. Food items carry a larger weight in the WPI basket than in the CPI basket.
  2. Services are covered only in the CPI, not in the WPI.
  3. Unlike the CPI, the WPI does not capture the margins added between the wholesaler and the final consumer.
  • A. 3 only
  • B. 1, 2 and 3
  • C. 2 and 3 only
  • D. 1 and 2 only

Q3. Consider the following assertion: 'The wide gap between WPI inflation (11.4 per cent) and CPI inflation in September 2026 signals a risk that retail inflation may rise in the coming months.' Which of the following statements support/supports the above assertion?

  1. Industrial and farm input costs were reported to have remained elevated.
  2. The WPI measures prices at the producer or wholesale stage, and these prices feed into the prices retailers charge consumers.
  3. Services, which form a sizeable part of the CPI basket, are excluded from the WPI.
  • A. 1 and 3 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q4. India meets a large part of its edible oil requirement through imports. Consider the following developments: Which of the above would tend to raise domestic edible oil prices?

  1. A bumper domestic rapeseed-mustard harvest
  2. Depreciation of the rupee against the US dollar
  3. An increase in the customs duty on imported crude palm oil
  4. A rise in international palm oil prices
  • A. 2, 3 and 4 only
  • B. 1, 2 and 3 only
  • C. 2 and 4 only
  • D. 1, 2, 3 and 4

Q5. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. The fact that WPI inflation reached double digits in September 2026 for the first time in the 2022-23 base series does not, by itself, show that wholesale inflation was at its highest level ever.
  2. A rebased price index uses a revised basket of items and weights, so its readings are not directly comparable with those of the series it replaces.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct

Q6. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. Between August and September 2026, rural CPI inflation rose more sharply than urban CPI inflation amid a broad-based rise in food prices.
  2. Food and beverages carry a smaller weight in the rural CPI basket than in the urban CPI basket, since rural households consume much of what they grow.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct

Q7. Suppose global crude oil prices rise sharply while domestic food prices and service charges remain unchanged. Compared with CPI inflation, WPI inflation in India would most likely:

  • A. Rise by less than CPI inflation, as fuel and power carry a larger weight in the CPI
  • B. Remain unchanged, as the WPI tracks only primary agricultural articles and not fuel
  • C. Rise by more than CPI inflation, as fuel and power carry a larger weight in the WPI
  • D. Rise by the same amount as CPI inflation, as both indices share an identical basket