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