CAPF AC 2020 Q49: Indian Economy – Inflation & Price Indices
Which of the following goods are included to estimate food inflation in India?
1. Wheat
2. Paddy
3. Tobacco
4. Sugar
Select the correct answer using the code given below:
- (a) 1, 2 and 3
- (b) 2, 3 and 4
- (c) 1, 3 and 4
- (d) 1, 2 and 4
Answer: (d) 1, 2 and 4
Explanation
What counts in food inflation
How to think: ask one question of each item: is it eaten as food?
Tobacco is not food, so it cannot be in the food group.
| Item | Food? | Where it sits in the price index |
|---|---|---|
| 1. Wheat | Yes | Cereals, in the food group |
| 2. Paddy | Yes | Cereals, in the food group |
| 3. Tobacco | No | Separate group: pan, tobacco and intoxicants |
| 4. Sugar | Yes | Sugar and confectionery, in the food group |
Food in the two main indices:
| Index | Food part |
|---|---|
| Consumer Price Index | Food and beverages, with the largest weight of about 45.9% |
| Wholesale Price Index | Food index = food articles + manufactured food products |
Answer: (d) 1, 2 and 4.
Why each option is right or wrong
- (a) Incorrect. This includes tobacco, which is not a food item, and leaves out sugar.
- (b) Incorrect. This includes tobacco and leaves out wheat.
- (c) Incorrect. This includes tobacco and leaves out paddy.
- (d) CORRECT. Wheat, paddy and sugar are food items; tobacco is not.
Key point
Food inflation covers cereals (wheat, paddy), sugar, pulses, vegetables, milk, oils. Tobacco is in a separate group: pan, tobacco and intoxicants.
Remember
Food inflation: cereals, sugar, pulses, vegetables. Not tobacco.
Common mistakes
- Including tobacco because it is a farm crop.
- Dropping sugar because it is a manufactured product.
- Forgetting that food has the largest weight in the Consumer Price Index.
Exam tip
Educated guess: three options contain tobacco. The only option without it must be right.
Sources
- Ministry of Statistics and Programme Implementation — Consumer Price Index (base 2012) groups and weights
- Office of the Economic Adviser, DPIIT — Wholesale Price Index (base 2011-12) food index