Inflation: UPSC Previous Year Questions (Indian Economy)
2 previous year UPSC Prelims questions on Inflation (Indian Economy). Choose an option to see the answer and explanation.
Explanations state facts as of the year each question was asked; words like “recently” refer to that year.
Showing 1–2 of 2 questions
UPSC 2015Indian Economy · Inflation
Q1. Which of the following brings out the ‘Consumer Price Index Number for Industrial Workers’?
Explanation
The Consumer Price Index for Industrial Workers (CPI-IW) is compiled and released by the Labour Bureau which operates under the Ministry of Labour and Employment, Government of India. CPI-IW measures inflation and changes in the cost of living for industrial workers across various sectors. It serves as a benchmark for revising wages, dearness allowance (DA), and social security benefits for workers and government employees. The Labour Bureau publishes CPI-IW monthly based on data collected from major industrial centers across India. The Labour Bureau has been compiling the CPI-IW since 1944, with revisions to the base year occurring periodically (e.g., 2001=100, 2016=100) to reflect changing consumption patterns.
UPSC 2015Indian Economy · Inflation
Q2. With reference to inflation in India, which of the following statements is correct?
Explanation
Inflation is the general rise in prices of goods and services within a particular economy wherein, the purchasing power of consumers decreases, and the value of the cash holdings erode. Reserve Bank of India is the authority to control inflation through monetary policies which it does by increasing bank rates, repo rates, cash reserve ratio, buying dollars, regulating money supply and availability of credit. Statement (a) is incorrect: While the government plays a key role in controlling inflation through fiscal policies (such as taxation, subsidies, and public expenditure), the Reserve Bank of India (RBI) also plays a key role in controlling inflation through its monetary policies (such as adjusting inter-est rates and controlling money supply). Statement (b) is incorrect: The RBI is central to controlling inflation in India. Since 2016, the RBI has adopted an inflation targeting framework, aiming to keep inflation at 4%, with a tolerance band of 2% on either side. The RBI uses tools like repo rates and reverse repo rates to influence inflation. Statement (c) is correct: When the central bank decreases the money supply in the economy (by increasing interest rates or selling government securities) it leads to less money circulating in the market. This reduces demand and, consequently, controls inflation. This process is known as tight monetary policy. Statement (d) is incorrect: Increasing money circulation typically leads to demand-pull inflation, where more money in the system drives up prices. To control inflation, reducing the money supply (through higher interest rates and other measures) is more effective.
Answer key for these questions
Q
UPSC year
Correct answer
1
2015
(c) The Labour Bureau
2
2015
(c) Decreased money circulation helps in controlling the inflation
Frequently asked questions
How many previous year UPSC questions are there on Inflation?
This page covers 2 previous year UPSC Prelims GS Paper-I questions on Inflation (Indian Economy), asked from 1997 to 2021. Each has the correct answer and an explanation.
How should I use previous year UPSC questions for Prelims?
Attempt each question first, then open the answer and read the explanation for every option. Repeat by chapter, and track which statements UPSC reuses across years. Previous year questions show the exam pattern and difficulty level.
Which years are covered for Inflation?
Questions on Inflation (Indian Economy) are available for 9 years, from 1997 to 2021. Use the Year filter to practise a single paper.
