UPSC Prelims Practice Questions — PRESS RELEASE OF CONSUMER PRICE INDEX ON BASE 2024=100 FOR OCTOBER, 2026

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 determined by the Central Government in consultation with the Reserve Bank, and not by the Monetary Policy Committee itself.
  2. While the Central Government fixes the 4 per cent point target, the 2–6 per cent tolerance band around it is fixed by the Monetary Policy Committee.
  3. Because the target is defined in terms of the Consumer Price Index, a fall in wholesale price inflation alone does not bring inflation back within the target.
  • A. 1 only
  • B. 1, 2 and 3
  • C. 1 and 3 only
  • D. 2 and 3 only

Q2. Under the Flexible Inflation Targeting framework, the target is 4 per cent CPI-Combined inflation with a tolerance band of 2–6 per cent. Consider the following hypothetical paths of CPI-Combined inflation: Which of the situations given above would constitute a 'failure to achieve the inflation target' requiring the Reserve Bank to report to the Central Government?

  1. Quarterly average inflation of 1.8%, 1.6% and 1.9% in three consecutive quarters
  2. Quarterly average inflation of 6.4%, 6.2% and 6.3% in three consecutive quarters, with some individual months below 6%
  3. Quarterly average inflation of 7.8% in one quarter, followed by 5.9% and 6.6% in the next two quarters
  • A. 1 only
  • B. 2 only
  • C. 2 and 3 only
  • D. 1 and 2 only

Q3. Consider the following statements regarding price indices in India: Which of the statements given above is/are correct?

  1. CPI for Industrial Workers, rather than CPI-Combined, is the index primarily used to regulate the dearness allowance of government employees and industrial workers.
  2. The statutory inflation target of the Reserve Bank is defined in terms of CPI for Industrial Workers because it best captures the cost of living of wage earners.
  • A. 1 only
  • B. 2 only
  • C. Both 1 and 2
  • D. Neither 1 nor 2

Q4. With reference to the Consumer Price Index (Rural, Urban, Combined) on base 2024=100, consider the following statements: Which of the statements given above is/are correct?

  1. A general index value of 110.05 for October 2026 means that year-on-year inflation in October 2026 was 10.05 per cent.
  2. Item weights in the index reflect the shares of those items in household consumption expenditure recorded in a consumption expenditure survey.
  3. Since the base year is 2024, the weights must necessarily be drawn from consumption expenditure data for calendar year 2024 alone.
  4. Because the new basket differs from the old one, no all-India series on the new base is available for any period before 2024.
  • A. 2 only
  • B. 1, 3 and 4 only
  • C. 2, 3 and 4 only
  • D. 1 and 2 only

Q5. Suppose retail inflation rises mainly because a crop failure triples the price of a perishable vegetable. Consider the following statements: Which of the statements given above is/are correct?

  1. An increase in the policy repo rate would bring the vegetable's price down quickly by easing the supply bottleneck.
  2. Release of buffer stocks and changes in import or export policy address such a price spike more directly than monetary tightening.
  3. Monetary policy may still need to respond if the food price shock is large and persistent enough to spill over into non-food inflation.
  • A. 3 only
  • B. 2 and 3 only
  • C. 1, 2 and 3
  • D. 1 and 2 only

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

  1. A sharp rise in food prices reduces the real consumption of poorer households proportionately more than that of richer households.
  2. Poorer households spend a larger share of their total consumption expenditure on food than richer households.
  • 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. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. Year-on-year CPI inflation for a month can rise even if the price index in that month is unchanged from the previous month.
  2. Year-on-year CPI inflation compares the index of a month with the index of the immediately preceding month.
  • 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

Q8. All-India CPI-Combined year-on-year inflation rose in every month from 2.74% in January 2026 to 6.09% in October 2026, while the index had stayed broadly flat through 2025. Which of the following inferences can be drawn from the above?

  1. The all-India retail price level in October 2026 was about 6 per cent higher than in October 2025.
  2. The rise in year-on-year inflation through 2026 came from a falling base rather than from prices rising during 2026.
  3. Each of the divisions of the CPI basket recorded higher inflation in October 2026 than in January 2026.
  • A. 1, 2 and 3
  • B. 2 and 3 only
  • C. 1 and 2 only
  • D. 1 only