Consider the following statements:
Which of the statements given above is/are correct?
Statement 1 is correct. The weightage of food and beverages is significantly higher in the Consumer Price Index (CPI) basket than in the Wholesale Price Index (WPI). For instance, food and beverages account for approximately 45.86% in CPI (Combined), whereas food articles have a weight of about 24% in WPI. This reflects the direct impact of food prices on household budgets.
Statement 2 is correct. The Wholesale Price Index (WPI) measures price changes at the wholesale level and is confined to goods only. It does not capture changes in the prices of services. In contrast, the Consumer Price Index (CPI) reflects price changes at the retail level and includes both goods and services, making it a more comprehensive measure of inflation for consumers.
Statement 3 is incorrect. The Reserve Bank of India (RBI) adopted the Consumer Price Index (Combined) as its primary measure for inflation targeting and for making monetary policy decisions, including changes to key policy rates. This shift occurred following the recommendations of the Urjit Patel Committee report in 2014 and its formal adoption in 2016, replacing the earlier reliance on WPI for monetary policy formulation.