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    Question

    Which of the following statement is correct with respect to inflation in Indian economy?

    A Food Basket in India is largely affected by Technology Correct Answer Incorrect Answer
    B General Inflation is more volatile than core inflation Correct Answer Incorrect Answer
    C Inflation in the Indian economy is due to supply side issues Correct Answer Incorrect Answer
    D The Reserve Bank of India has no role in controlling the inflation Correct Answer Incorrect Answer

    Solution

    Food basket which has a large weight in the price indices (particularly in Consumer Price Index) in India is affected by seasonality. Withinfoodbasketofthepriceindices,pulses,fruitsandvegetablesgroups,inparticular,havewitnessedlargechanges in prices mainly due to their seasonalnature. General (Headline) inflation is more volatile than core ; it fluctuates more due to large changes in the relative prices of certain food items vulnerable to supply shocks. Inflation in India has been due to both demand and supply side issues from time to time RBI has an important role in controlling inflation. RBI follows the monetary policy on inflation targeting with inflation target as 4% with +/- 2% range for the period from August 5, 2016 to March 31, 2021.

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