Explanation:

Explanation:  Statement 2 is incorrect: The WPI comprises of three major groups:  Primary Articles (eg- Food Articles, Vegetables, Milk, Minerals etc.) has the weightage of 22.62%.  Fuel and Power (eg- LPG, Petrol etc) has the weightage of 13.15%.  Manufactured Products (e.g.- manufacture of food products, sugar, manufacture of textiles etc.) has the weightage of 64.23%.  The major components in CPI (C) are as follows (along with their weights):  Food and Beverages – 45.86%  Housing – 10.07%  Fuel and Light – 6.84%  Clothing and Footwear – 6.53%  Pan, tobacco and intoxicants – 2.38%  Miscellaneous – 28.32% Supplementary notes: Wholesale Price Index (WPI) and Consumer Price Index (CPI)  Services are not traded/transacted in the wholesale markets. So, WPI data does not include the in fl ation due to services. The CPI basket consists of services like housing, education, medical care, recreation etc. which are not part of WPI basket.  WPI provides estimates of in fl ation at the wholesale transactions level for the economy. This helps in timely intervention by the Government to check in fl ation, in particular in fl ation in essential commodities, before the price increase spills over to retail prices. The CPI (C) is used as nominal anchor for conduct of monetary policy in India.

 Monetary Policy Committee is mandated to keep CPI (C) in range 2% – 6%. So CPI is used for in fl ation targeting .  CPI is also used as de fl ators in the National Accounts.  CPI is also used for calculating Dearness Allowance.  CPI includes indirect taxes. So, when government increases GST rate, it is captured in the CPI data. But in the new series of WPI (2011-12), government has excluded indirect taxes while measuring WPI. This is in consonance with international practices and will make the new WPI conceptually closer to Producer Price Index (PPI).