UPSC PracticeUPSC Practice
UPSC Notes

Inflation and its Measurement in India

PYQs

8

Articles

1

Momentum

21

Phase IFoundation

Background

Overview

Understanding inflation is crucial for economic policy, its impact on different sectors, and the role of the central bank. UPSC frequently asks about inflation types, causes, effects, and measurement.

Inflation refers to the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. In India, the primary measures of inflation are the Consumer Price Index (CPI) for retail inflation and the Wholesale Price Index (WPI) for wholesale inflation, with the Producer Price Index (PPI) being an emerging measure.

Phase IIStatic core

Facts & tables

Key facts

CPI (Combined)

Measures changes in prices of goods and services purchased by consumers, used by RBI for inflation targeting.

WPI

Measures changes in prices of goods at the wholesale level, reflecting producer costs.

Core Inflation

Excludes volatile components like food and fuel to reveal underlying price trends.

Drivers of Inflation

Food and fuel costs are significant contributors to headline inflation in India.

Reference table

Key Inflation Indices in India

IndexMeasuresBase YearUsed by RBI
CPI (Combined)Retail prices of goods/services2012Yes
WPIWholesale prices of goods2011-12No (primarily for policy analysis)
PPIAverage change in selling prices received by domestic producersN/A (new series)Emerging

Reference table

Static syllabus anchors

TypeReference
Conceptual areaMacroeconomic Trends & Inflation

Reference table

Institutions & roles

BodyRole
Reserve Bank of IndiaMonitors and targets inflation
Phase IIIExam lens

Prelims angle

Overview

Prelims angle: Multi-statement analysis

Prelims angle: Conceptual understanding

Quick revision

  • CPI (Combined) is RBI's primary inflation target.
  • Food and fuel prices are major drivers of headline inflation.
  • Core inflation excludes volatile food and fuel components.
  • WPI measures wholesale price changes, PPI measures producer prices.
  • High inflation erodes purchasing power and impacts economic stability.

High-confidence PYQs

2023Multi-statement analysis, Conceptual understanding

Correct the following statements: Statement-I: In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes. Statement-...

EconomyOpen question
2022Multi-statement analysis, Conceptual understanding

In India, which one of the following is responsible for maintaining price stability by controlling inflation?

EconomyOpen question

With reference to the Indian economy, consider the following statements: 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy gover...

EconomyOpen question

With reference to Convertible Bonds consider the following statements: 1. As there is an option to exchange the bond for equity, Convertible Bonds pay a low...

EconomyOpen question
2022Statement-based questions, Conceptual understanding

In India, which one of the following is responsible for maintaining price stability by controlling inflation?

EconomyOpen question

With reference to the Indian economy, consider the following statements: 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy gover...

EconomyOpen question

With reference to Convertible Bonds consider the following statements: 1. As there is an option to exchange the bond for equity, Convertible Bonds pay a low...

EconomyOpen question
2022Institutional roles and functions, Factual recall

In India, which one of the following is responsible for maintaining price stability by controlling inflation?

EconomyOpen question

With reference to the Indian economy, consider the following statements: 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy gover...

EconomyOpen question

With reference to Convertible Bonds consider the following statements: 1. As there is an option to exchange the bond for equity, Convertible Bonds pay a low...

EconomyOpen question
2020Multi-statement analysis, Conceptual understanding

Consider the following statements: 1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI). 2. The WPI doe...

EconomyOpen question
2019Statement-based questions, Factual recall

Consider the following statements: 1. Purchasing Power Parity (PPP) exchange rates are calculated by comparing the prices of the same basket of goods and se...

EconomyOpen question
2015Factual recall, Terminology-based question

Which of the following brings out the ‘Consumer Price Index Number for Industrial Workers’?

EconomyOpen question

In the Index of Eight Core Industries, which one of the following is given the highest weight?

EconomyOpen question
2015Factual recall, Institutional roles and functions

Which of the following brings out the ‘Consumer Price Index Number for Industrial Workers’?

EconomyOpen question

In the Index of Eight Core Industries, which one of the following is given the highest weight?

EconomyOpen question

Topic timeline

Macroeconomic Trends & Inflation
Prelims 2015· Factual recall, Terminology-based question

Which of the following brings out the ‘Consumer Price Index Number for Industrial Workers’?

Open question

In the Index of Eight Core Industries, which one of the following is given the highest weight?

Open question
Prelims 2015· Factual recall, Institutional roles and functions

Which of the following brings out the ‘Consumer Price Index Number for Industrial Workers’?

Open question

In the Index of Eight Core Industries, which one of the following is given the highest weight?

Open question
Prelims 2019· Statement-based questions, Factual recall

Consider the following statements: 1. Purchasing Power Parity (PPP) exchange rates are calculated by comparing the prices of the same basket of goods and se...

Open question
Prelims 2020· Multi-statement analysis, Conceptual understanding

Consider the following statements: 1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI). 2. The WPI doe...

Open question
Prelims 2022· Multi-statement analysis, Conceptual understanding

In India, which one of the following is responsible for maintaining price stability by controlling inflation?

Open question

With reference to the Indian economy, consider the following statements: 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy gover...

Open question

With reference to Convertible Bonds consider the following statements: 1. As there is an option to exchange the bond for equity, Convertible Bonds pay a low...

Open question
Prelims 2022· Statement-based questions, Conceptual understanding

In India, which one of the following is responsible for maintaining price stability by controlling inflation?

Open question

With reference to the Indian economy, consider the following statements: 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy gover...

Open question

With reference to Convertible Bonds consider the following statements: 1. As there is an option to exchange the bond for equity, Convertible Bonds pay a low...

Open question
Prelims 2022· Institutional roles and functions, Factual recall

In India, which one of the following is responsible for maintaining price stability by controlling inflation?

Open question

With reference to the Indian economy, consider the following statements: 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy gover...

Open question

With reference to Convertible Bonds consider the following statements: 1. As there is an option to exchange the bond for equity, Convertible Bonds pay a low...

Open question
Prelims 2023· Multi-statement analysis, Conceptual understanding

Correct the following statements: Statement-I: In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes. Statement-...

Open question

​Fuller expression: on India’s inflation

15 Jun 2026 · Inflation is the general increase in prices. India uses CPI (retail) and WPI (wholesale) to measure it, with PPI emerging. Food and fuel are major drivers, and core inflation excludes these volatile items.

Read article

Related topics

Current topic

Inflation and its Measurement in India

Often confused with

External Sector & Capital Flows

Open notesOften confused with

Monetary Policy and Reserve Bank of India's Role

Open notes
Often confused with

Index of Industrial Production (IIP)

Coming soon
Often confused with

Producer Price Index (PPI) and Wholesale Price Index (WPI)

Open notesOften confused with

Index of Core Industries (ICI)

Open notes
Often confused with

Statistical Reforms and Economic Data Governance

Coming soon

Practice writing on this topic

UPSC has asked 8 linked questions on Inflation and its Measurement in India in Mains. Write an answer to one — and get it evaluated.

See Mains PYQsEvaluate an answer
Browse all topics