Economy · 18 Jul 2026

RBI inflation target CPI WPI

With reference to India's monetary policy framework and the June 2026 inflation data, consider the following statements:

  1. The RBI's inflation target under the RBI Act, 1934 is 4%, with a tolerance band of plus or minus 2%.
  2. Retail (CPI) inflation in June 2026 breached the RBI's target while wholesale (WPI) inflation remained higher than retail inflation.
  3. The Reserve Bank of India's flexible inflation targeting mandate is based on the Consumer Price Index, not the Wholesale Price Index.

How many of the above statements are correct?

AOnly one
BOnly two
CAll three
DNone

Tests whether the candidate can verify multiple compound statements independently, including the precise legal anchor (CPI vs WPI) of India's flexible inflation targeting framework, rather than pattern-matching to a partial-correct trap.

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This question is based on: Why a 30% Wholesale Fuel Shock Is Only Now Showing Up in Your Retail Bill
Take this in full test mode → Instructions for 18 Jul 2026
About this question

Why in news

India's retail inflation crossed the RBI's 4% target for the first time under the new CPI series in June 2026, hitting 4.38%, while wholesale inflation stayed near 10%, driven by a nearly 30% wholesale fuel and power price shock finally passing through to consumers.

Why for UPSC

UPSC tests whether candidates understand which specific index (CPI, not WPI) legally anchors India's inflation targeting mandate - a frequently confused distinction - combined with the ability to verify multiple related statements independently rather than assuming a partial-correctness trap.

Prelims summary

The RBI's statutory inflation target (RBI Act, 1934) is 4% ± 2%, based on CPI, not WPI. In June 2026, CPI breached target at 4.38% while WPI stayed higher at 9.87%, reflecting a wholesale-to-retail pass-through lag.

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