Consider the following statements regarding inflation : Statement (A) : Head-line inflation refers to the rate of change in the Consumer Price Index Number, a measure of the average price of a standard basket of goods and services consumed by a typical family. Statement (B) : Core inflation measures the change in average consumer prices after excluding from the Consumer Price Index certain items of volatile prices such as food and fuel. Of these statements,

Correct — option (2), Both (A) and (B) are correct.

Statement (A) is correct. Headline inflation is the rate of change of the all-items Consumer Price Index. In the Economic Survey 2022-23, Table V.1 on CPI-Combined retail inflation lists "Headline Inflation" with a weight of 100.0, the whole basket.

The index itself, in the words of NCERT's Introductory Macroeconomics (2026-27 reprint), is "the index of prices of a given basket of commodities which are bought by the representative consumer", which is what statement (A) describes.

Statement (B) is correct. Core inflation leaves out the volatile food and fuel items. In the Economic Survey 2022-23, Table V.1 gives CPI-Combined weights of 45.9 for food & beverages, 6.8 for fuel and light, and 47.3 for core inflation.

That 47.3 is what remains of 100 once those two groups are taken out (100.0 – 45.9 – 6.8).

With both statements correct, the code is option (2).

Why the others are wrong

• (1)
  Neither (A) nor (B) is correct. — Both statements match how the Economic Survey 2022-23 uses the terms. Its CPI-Combined table gives headline inflation a weight of 100.0, the whole basket.

  The same table prints a core inflation weight of 47.3, the share left after food & beverages (45.9) and fuel and light (6.8).

• (3)
  Only (B) is correct. — This rejects statement (A), which is correct. Headline inflation is the rate of change of the all-items CPI, the index of a basket of goods and services bought by consumers.

  The word "headline" marks the all-items rate. The Economic Survey 2022-23 uses it for the wholesale index too, but in consumer-price terms it is the CPI rate.

• (4)
  Only (A) is correct. — This rejects statement (B), which is correct. Core inflation excludes food and fuel: the Survey's CPI-Combined weights give core 47.3 out of 100, after food & beverages (45.9) and fuel and light (6.8).

  The Survey describes core inflation as an important measure of demand-pull inflation.

Headline inflation takes the whole consumer basket. Core inflation removes food and fuel, whose prices can move sharply with supply shocks such as poor harvests or changes in oil prices.

The Economic Survey 2022-23 calls core inflation an important measure of demand-pull inflation. It read core inflation, sticky at nearly 6 per cent, as reflecting second-round effects of earlier supply shocks passing into retail prices.

The Survey ties part of 2022's price rise to excessive summer heat and uneven rainfall that cut farm supply, and the later easing partly to good monsoons. Shocks of this kind reach headline inflation through food.

The wholesale index has its own core measure. The Survey defines WPI core inflation as manufactured products minus food products.

Key facts

• Economic Survey 2022-23, Table V.1: in the CPI-Combined, headline inflation carries a weight of 100.0, the whole basket.
• NCERT: the CPI is the index of prices of a given basket of commodities bought by the representative consumer.
• Economic Survey 2022-23, Table V.1: CPI-Combined weights are food & beverages 45.9, fuel and light 6.8, core 47.3.
• The Economic Survey 2022-23 calls core inflation an important measure of demand-pull inflation.
• For wholesale prices, the Survey defines core inflation as manufactured products minus food products.

Common traps

• Swapping the two measures: core leaves out food and fuel; headline keeps the whole basket.
• Assuming headline inflation is the steadier measure: between April and December 2022, food inflation, which headline includes and core does not, ranged from 4.2 to 8.6 per cent while core stayed at around 6 per cent, per the Economic Survey 2022-23.
• Tying "headline" only to the CPI: the Economic Survey 2022-23 also speaks of headline and core inflation for the wholesale index.

• practice — not a real PYQ

  In the Economic Survey 2022-23, core inflation for the Wholesale Price Index is defined as

  • (a)Manufactured products minus food products
  • (b)Primary articles minus food articles
  • (c)All commodities minus fuel and power
  • (d)Food articles plus food products
  Answer(1) — The Survey's WPI table labels core inflation "Manufactured Products-Food products". Option (4) is how the same table defines WPI food inflation; options (2) and (3) are not the Survey's definition.
• practice — not a real PYQ

  According to the Economic Survey 2022-23, between April and December 2022, which of the following stayed at around 6 per cent (except in April 2022)?

  • (a)Food inflation
  • (b)Core inflation
  • (c)Fuel and light inflation
  • (d)The policy repo rate
  Answer(2) — The Survey says core inflation stayed at around 6 per cent except in April 2022. Option (1) ranged from 4.2 to 8.6 per cent; option (3) averaged 10.5 per cent over April–December 2022 in the Survey's Table V.1; option (4) rose from 4.0 to 6.25 per cent over the period.