Objective question on India’s Inflation at 77-Month Low: Decoding the June 2025 CPI-WPI Trend

 

Q1. Consider the following statements:

1. The WPI basket does not include services.

2. The CPI basket includes both goods and services.

3. The RBI uses WPI for inflation targeting.

Which of the above statements is/are correct?
A) 1 and 2 only ✅
B) 2 and 3 only
C) 1 and 3 only
D) All of the above

📝 Explanation: WPI does not include services. CPI includes both goods and services. RBI uses CPI (not WPI) for inflation targeting under the Monetary Policy Framework.

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Q2. Which of the following items contributed to the decline in food inflation in June 2025?

1. Vegetables

2. Pulses

3. Milk

4. Spices

A) 1, 2 and 4 only ✅
B) 1, 3 and 4 only
C) 2, 3 and 4 only
D) All of the above

📝 Explanation: According to the data, vegetables, pulses, and spices saw deflation. Milk was not specifically mentioned as deflationary.

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Q3. In June 2025, the CPI-based retail inflation in India was recorded at:

A) 4.5%
B) 3.6%
C) 2.1% ✅
D) -0.13%

📝 Explanation: As per the Consumer Price Index (CPI), inflation dropped to 2.1%, the lowest in 77 months.

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Q4. Which of the following statements is/are correct regarding the Wholesale Price Index (WPI)?

1. It includes prices of primary articles, fuel, and manufactured goods.

2. It is compiled by the Ministry of Commerce and Industry.

3. WPI is used by RBI for monetary policy decisions.

A) 1 and 2 only ✅
B) 2 and 3 only
C) 1 and 3 only
D) All of the above

📝 Explanation: WPI is calculated by the Ministry of Commerce. RBI uses CPI, not WPI, for monetary policy decisions.

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Q5. Which category in CPI saw a slight increase in inflation in June 2025?

A) Fuel and Light
B) Housing ✅
C) Food and Beverages
D) Paan, Tobacco & Intoxicants

📝 Explanation: The housing segment in CPI increased to 3.24% from 3.16% in May.

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Q6. Consider the following:

1. CPI is released by the Ministry of Statistics and Programme Implementation (MoSPI).

2. WPI is released by the Reserve Bank of India (RBI).

3. CPI covers both rural and urban areas separately.

Which of the statements is/are correct?

A) 1 and 2 only
B) 1 and 3 only ✅
C) 2 and 3 only
D) All of the above

📝 Explanation: CPI is published by MoSPI, not RBI. It provides rural, urban, and combined data.

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Q7. In June 2025, which of the following showed deflation in the WPI data?

1. Food Articles

2. Crude Petroleum and Natural Gas

3. Paan and Tobacco

A) 1 and 2 only ✅
B) 2 and 3 only
C) 1 and 3 only
D) All of the above

📝 Explanation: WPI showed deflation in food articles (-3.75%) and crude petroleum & natural gas (-12.3%). Paan and tobacco are in CPI, not WPI.

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Q8. The term 'base effect' in inflation refers to:

A) Fall in base prices over the years
B) A statistical phenomenon affecting year-on-year comparison ✅
C) The minimum rate of inflation allowed by RBI
D) The average inflation over a five-year period

📝 Explanation: The base effect refers to changes in inflation readings due to the previous year’s high or low inflation base, making current changes appear bigger or smaller.

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Q9. Which of the following is NOT included in the CPI calculation?

A) Education
B) Medical care
C) Industrial machinery ✅
D) Food and beverages

📝 Explanation: Industrial machinery is included in WPI (manufactured products), not in CPI.

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Q10. In June 2025, what was the recorded inflation in the fuel and light category of CPI?

A) 3.24%
B) 2.55% ✅
C) 2.1%
D) 8.4%

📝 Explanation: Fuel and light inflation eased to 2.55%, down from 2.8% in May 2025.