1. What is Inflation?

• Definition: Sustained rise in the general price level of goods & services, eroding purchasing power.
• Measured by: CPI (Consumer Price Index), WPI (Wholesale Price Index), GDP-Deflator.
• Inflation Rate Formula:
  (Current Index – Previous Index) ÷ Previous Index × 100

2. Types of Inflation

3. Key Price Indices in India

4. Inflation Targeting Framework

• Flexible Inflation Targeting (FIT) adopted 20 Feb 2015 (RBI-GoI Agreement).
• Effective: 5 Aug 2016 (Amended RBI Act, Section 45ZB).
• Target: 4 % CPI-Combined ± 2 % band (2–6 %).
• Reviewed every 5 years; current period 2021-26.
• Monetary Policy Committee (MPC): 6 members; 3 from RBI, 3 GoI nominees; meet at least 4 times a year.

5. Historic Inflation Milestones

6. Measurement Agencies & Frequency

7. Inflation Control Tools

8. Important Committees

9. One-Liner Revision Facts

• India abandoned WPI-targeting in 2014.
• CPI base year 2012 replaced 2010; WPI base 2011-12 replaced 2004-05.
• Highest weight in CPI: Food & Beverages (45.86 %).
• Highest weight in WPI: Manufactured products (64.23 %).
• RBI prints “Inflation Expectations Survey” quarterly.
• Core inflation = CPI minus food & fuel.
• Deflation is negative inflation; disinflation is falling inflation.
• Stagflation = high inflation + high unemployment + low growth.
• Phillips Curve shows inverse relation between inflation & unemployment.
• Monetary Policy Framework Agreement is reviewed every 5 years.

10. Quick-Reference Table: CPI vs WPI

Practice MCQs (Railway Exam Level)

1. Which index is used by RBI for inflation targeting in India?
   A. WPI B. CPI-Combined C. GDP deflator D. CPI-IW

   Answer

   B

2. The current inflation target band in India is:
   A. 2–4 % B. 2–6 % C. 4–6 % D. 3–5 %

   Answer

   B

3. The base year of CPI-Combined is:
   A. 2004-05 B. 2010 C. 2012 D. 2011-12

   Answer

   C

4. Who heads the Monetary Policy Committee?
   A. FM B. RBI Governor C. CEA D. PM

   Answer

   B

5. Inflation targeting became legally binding for RBI in:
   A. 2014 B. 2015 C. 2016 D. 2018

   Answer

   C

6. Highest weight in WPI belongs to:
   A. Primary articles B. Fuel C. Manufactured products D. Services

   Answer

   C

7. The agency that releases WPI is:
   A. CSO B. NSSO C. OEA (DPIIT) D. NITI Aayog

   Answer

   C

8. Which of the following is NOT a monetary tool to curb inflation?
   A. Repo hike B. CRR hike C. OMO sale D. Raising MSP

   Answer

   D

9. The Urjit Patel Committee recommended targeting:
   A. WPI B. GDP deflator C. CPI D. Core WPI

   Answer

   C

10. India faced hyper-inflation (>20 %) in which year?
    A. 1967 B. 1974-75 C. 1991 D. 2008

    Answer

    B

11. Core inflation excludes:
    A. Food & fuel B. Clothing C. Housing D. Services

    Answer

    A

12. The current five-year FIT period ends in:
    A. 2025 B. 2026 C. 2027 D. 2030

    Answer

    B

13. Which statement is correct?
    A. WPI includes services B. CPI is released monthly by DPIIT
    C. RBI uses CPI for target D. Base year of WPI is 2012

    Answer

    C

14. Stagflation is characterised by:
    A. High growth, low inflation B. High inflation, high unemployment
    C. Low inflation, low growth D. Negative inflation

    Answer

    B

15. The weight of food in CPI-Combined is approximately:
    A. 35 % B. 40 % C. 46 % D. 55 %

    Answer

    C

16. The first official committee to suggest 4 % inflation target was:
    A. Rangarajan B. Chakravarty C. Narasimham D. Patel

    Answer

    B

17. When inflation is negative it is called:
    A. Disinflation B. Deflation C. Stagflation D. Hyperinflation

    Answer

    B

18. Which of the following is a fiscal measure to reduce inflation?
    A. Cut in excise duty B. Repo rate cut C. OMO purchase D. SLR cut

    Answer

    A

19. The Monetary Policy Committee meets at least:
    A. 2 times B. 4 times C. 6 times D. 12 times

    Answer

    B

20. The latest released CPI (Dec 2023) was approximately:
    A. 3.2 % B. 4.25 % C. 5.5 % D. 7.1 %

    Answer

    B

Revise → Recall → Reattempt. All the best for your Railway Exam!