UPSC Prelims Practice Questions — Spiralling food prices

Q1. With reference to the flexible inflation targeting framework under the Reserve Bank of India Act, 1934, consider the following statements: Which of the statements given above is/are correct?

  1. The inflation target is expressed in terms of the Consumer Price Index.
  2. The target is treated as missed if headline inflation goes above the upper tolerance limit in any single month.
  3. If the target is missed, the Monetary Policy Committee must report the reasons for the failure directly to Parliament.
  • A. 2 and 3 only
  • B. 1 only
  • C. 1 and 2 only
  • D. 1, 2 and 3

Q2. 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 MPC determines the policy repo rate required to achieve the inflation target.
  2. Members drawn from the RBI and external members are equal in number on the committee.
  3. The Governor can exercise a second vote only when the votes of members are equally divided.
  • A. 1, 2 and 3
  • B. 2 and 3 only
  • C. 1 only
  • D. 1 and 3 only

Q3. Consider the following statements regarding India's monetary policy framework: Which of the statements given above is/are correct?

  1. The 4% CPI inflation target is fixed by the Monetary Policy Committee.
  2. The policy repo rate is fixed by the Central Government in consultation with the RBI.
  • A. 1 only
  • B. 2 only
  • C. Both 1 and 2
  • D. Neither 1 nor 2

Q4. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. A rise in the policy repo rate can help contain a food-led inflation episode even though it does not increase crop output.
  2. A higher policy repo rate directly reduces the cost of storing and transporting perishable farm produce.
  • 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

Q5. In September 2026, year-on-year inflation was 108.09% for onion, 62.85% for ginger and 54.62% for garlic, while potato (−11.50%) and tomato (−8.62%) showed deflation. Rural food inflation rose by almost 2 percentage points over August. Consider the following inferences: Which of the inferences given above can validly be drawn from these facts?

  1. Since potato and tomato prices fell, the overall food price index must have declined in September.
  2. The price rise is being driven mainly by excess aggregate demand across the economy.
  3. Price pressure within the vegetable group is concentrated in particular items rather than spread uniformly.
  • A. 2 and 3 only
  • B. 1, 2 and 3
  • C. 1 only
  • D. 3 only

Q6. Consider the following assertion: Raising the policy repo rate in October 2026 was a defensible response even though the inflation was largely driven by supply shocks. Which of the following statements support/supports the above assertion?

  1. Sustained food price increases can raise inflation expectations and spill over into wages and the prices of other goods and services.
  2. Headline CPI inflation had stayed above the 4% target for four consecutive months and was approaching the upper tolerance limit.
  3. A higher repo rate increases the quantity of onion and garlic arriving in retail markets.
  • A. 1 only
  • B. 1, 2 and 3
  • C. 1 and 2 only
  • D. 2 and 3 only

Q7. In September 2026, all-India (combined) CPI inflation was 5.54%, rural CPI inflation was 6.08% and rural food inflation was 8.06%. The combined index is a weighted blend of the rural and urban indices. Consider the following inferences: Which of the inferences given above can validly be drawn?

  1. Urban CPI inflation in September 2026 was below 5.54%.
  2. Urban food inflation in September 2026 was below 8.06%.
  3. In rural areas, non-food items rose in price by less than 8.06% on average.
  4. The inflation target under the RBI Act stood breached as of September 2026.
  • A. 1 and 3 only
  • B. 1 and 2 only
  • C. 2 and 4 only
  • D. 1, 3 and 4 only

Q8. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. In September 2026, when inflation was led by food prices, rural CPI inflation was lower than all-India CPI inflation.
  2. Food items account for a larger share of the rural consumption basket than of the urban consumption basket.
  • 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