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    Question

    Assertion (A): In India, a sharp rise in the

    international prices of crude oil usually leads to a more immediate and significant increase in the Wholesale Price Index (WPI) compared to the Consumer Price Index (CPI). Reason (R): The weightage of the 'Fuel and Power' group in the WPI basket is nearly double its weightage in the CPI basket, and the WPI captures price changes at the first stage of transaction.
    A Both (A) and (R) are true, and (R) is the correct explanation of (A). Correct Answer Incorrect Answer
    B Both (A) and (R) are true, but (R) is NOT the correct explanation of (A). Correct Answer Incorrect Answer
    C (A) is true, but (R) is false. Correct Answer Incorrect Answer
    D (A) is false, but (R) is true. Correct Answer Incorrect Answer

    Solution

    Evaluating the Assertion (A) The Assertion is true . In India, WPI is more sensitive to global commodity shocks, especially crude oil. This is because WPI tracks "ex-factory" or "mandi" prices (wholesale level). When global oil prices rise, the impact is immediately reflected in the bulk prices of fuel and power, which are major inputs for the manufacturing and transport sectors.   Evaluating the Reason (R) The Reason is true and directly explains why the assertion holds.

    • Weightage Difference: In the WPI basket, 'Fuel and Power' has a weightage of approximately 13.15% . In the CPI (Combined) basket, the 'Fuel and Light' category has a significantly lower weightage of roughly 6.84% .
    • Stage of Transaction: WPI measures inflation at the producer/wholesaler level (first stage), whereas CPI measures it at the retail level (last stage). Retail prices often lag behind wholesale prices because retailers may temporarily absorb cost increases or because government subsidies/taxes (like excise duty cuts) may cushion the final consumer from the full brunt of a global price hike.
      Key Differences for Quick Reference  

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