UPSC Prelims Practice Questions — Breaching the target

Q1. With reference to India's Flexible Inflation Targeting (FIT) framework, consider the following statements about how the inflation target is fixed: 1. It is determined by the Central Government in consultation with the Reserve Bank of India. 2. It is expressed in terms of the Consumer Price Index. 3. It is reviewed and fixed once every five years. 4. It is notified through a resolution passed by the Monetary Policy Committee. Which of the above is/are NOT correct?

  1. It is determined by the Central Government in consultation with the Reserve Bank of India.
  2. It is expressed in terms of the Consumer Price Index.
  3. It is reviewed and fixed once every five years.
  4. It is notified through a resolution passed by the Monetary Policy Committee.
  • A. 1 and 2
  • B. 3 only
  • C. 4 only
  • D. 2 and 3

Q2. The recommendations of which one of the following committees formed the principal basis for India's adoption of a Consumer Price Index-based flexible inflation targeting framework in 2016?

  • A. The Expert Committee to Revise and Strengthen the Monetary Policy Framework (Urjit Patel Committee)
  • B. The Committee on Financial Sector Reforms (Raghuram Rajan Committee)
  • C. The Financial Sector Legislative Reforms Commission (B.N. Srikrishna Commission)
  • D. The Committee on Fuller Capital Account Convertibility (S.S. Tarapore Committee)

Q3. Consider the following statements comparing the inflation target for the cycle April 2026 - March 2031 with earlier arrangements: 1. The 4% target with a 2-6% tolerance band is numerically identical to that fixed for the previous five-year cycle. 2. The March 2026 decision was the second occasion on which the target was retained unchanged. 3. Unlike the target first notified in 2016, the current target is expressed in terms of the Wholesale Price Index. Which of the statements given above is/are correct?

  1. The 4% target with a 2-6% tolerance band is numerically identical to that fixed for the previous five-year cycle.
  2. The March 2026 decision was the second occasion on which the target was retained unchanged.
  3. Unlike the target first notified in 2016, the current target is expressed in terms of the Wholesale Price Index.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 only
  • D. 1, 2 and 3

Q4. Under the RBI Act, if average inflation remains outside the 2-6% tolerance band for three consecutive quarters, the Reserve Bank is required to submit a report explaining the failure and the remedial action proposed to which one of the following?

  • A. The Central Government
  • B. The Monetary Policy Committee
  • C. The Financial Stability and Development Council
  • D. The Standing Committee on Finance of Parliament

Q5. Among the major groups of the Wholesale Price Index, which one recorded the highest year-on-year inflation in June 2026?

  • A. Fuel & Power
  • B. Primary Articles
  • C. Manufactured Products
  • D. Food Articles

Q6. With reference to India's inflation data for June 2026, consider the following statements: 1. Retail (CPI) inflation rose to 4.38% from 3.93% in May 2026. 2. Consumer Food Price Index inflation stood at 5.32%. 3. Wholesale Price Index inflation was 9.87%. 4. The June 2026 print was the first time CPI inflation had crossed the 4% mark in over five years. Which of the above is/are NOT correct?

  1. Retail (CPI) inflation rose to 4.38% from 3.93% in May 2026.
  2. Consumer Food Price Index inflation stood at 5.32%.
  3. Wholesale Price Index inflation was 9.87%.
  4. The June 2026 print was the first time CPI inflation had crossed the 4% mark in over five years.
  • A. 1 and 2
  • B. 2 and 3
  • C. 4 only
  • D. 1 and 4

Q7. Consider the following pairings relating to India's price indices: 1. CPI - compiled and released by the National Statistical Office under MoSPI. 2. WPI - compiled by the Office of the Economic Adviser, DPIIT. 3. CPI - serves as the nominal anchor for monetary policy. 4. WPI - includes the prices of services in its basket. Which of the above is/are NOT correctly matched?

  1. CPI - compiled and released by the National Statistical Office under MoSPI.
  2. WPI - compiled by the Office of the Economic Adviser, DPIIT.
  3. CPI - serves as the nominal anchor for monetary policy.
  4. WPI - includes the prices of services in its basket.
  • A. 1 and 2
  • B. 3 only
  • C. 2 and 4
  • D. 4 only

Q8. With reference to the base years and structure of India's price indices, which of the following statements is/are correctly identified? 1. The revised Wholesale Price Index series uses the base year 2022-23. 2. The revised Consumer Price Index series uses the base year 2012. 3. The WPI comprises three major groups, one of which is Fuel & Power. 4. The new CPI series adopts the COICOP 2018 classification. Which of the above is/are correctly identified?

  1. The revised Wholesale Price Index series uses the base year 2022-23.
  2. The revised Consumer Price Index series uses the base year 2012.
  3. The WPI comprises three major groups, one of which is Fuel & Power.
  4. The new CPI series adopts the COICOP 2018 classification.
  • A. 1, 3 and 4
  • B. 1 and 2
  • C. 2, 3 and 4
  • D. 1, 2 and 3

Q9. With reference to the impact of the 2026 US-Iran conflict on India's oil economy, which of the following statements is/are correctly identified? 1. India imports about 90% of its crude oil requirement. 2. Crude oil prices surged above $100 per barrel during the conflict. 3. The conflict raised concerns over the Strait of Hormuz shipping route. 4. India meets the bulk of its crude requirement from domestic offshore fields. Which of the above is/are correctly identified?

  1. India imports about 90% of its crude oil requirement.
  2. Crude oil prices surged above $100 per barrel during the conflict.
  3. The conflict raised concerns over the Strait of Hormuz shipping route.
  4. India meets the bulk of its crude requirement from domestic offshore fields.
  • A. 1, 2 and 3
  • B. 2, 3 and 4
  • C. 1 and 4
  • D. 1, 2, 3 and 4

Q10. Which one of the following was the single largest source of India's crude oil imports in June 2026?

  • A. Russia
  • B. Iraq
  • C. Saudi Arabia
  • D. United States

Q11. The Monetary Policy Committee constituted under the Reserve Bank of India Act consists of how many members in total?

  • A. Four
  • B. Six
  • C. Seven
  • D. Three

Q12. With reference to the composition and mandate of the Monetary Policy Committee, which of the following statements is/are correctly identified? 1. The Governor of the RBI is its ex officio Chairperson. 2. It has three external members appointed by the Central Government. 3. In the event of a tie, the Governor has a casting vote. 4. It determines the Cash Reserve Ratio required to achieve the inflation target. Which of the above is/are correctly identified?

  1. The Governor of the RBI is its ex officio Chairperson.
  2. It has three external members appointed by the Central Government.
  3. In the event of a tie, the Governor has a casting vote.
  4. It determines the Cash Reserve Ratio required to achieve the inflation target.
  • A. 1, 2 and 3
  • B. 1 and 4
  • C. 2, 3 and 4
  • D. 1, 2, 3 and 4