Given below are two statements:
Statement I: The Wholesale Price Index (WPI) is the main measure of inflation currently used by the Reserve Bank of India to set monetary policy.
Statement II: Since 2016, CPI-Combined has been adopted as the nominal anchor for India's inflation targeting framework.
In the light of the above statements, choose the correct answer from the options given below:

Correct option is D

The correct answer is (d) Statement I is false but Statement II is true
. Statement I is false. The Reserve Bank of India (RBI) does not primarily use the WPI (Wholesale Price Index) to set monetary policy. The WPI measures inflation at the producer or wholesale level and does not reflect the prices paid by final consumers.
. Statement II is true. Following recommendations by the Urjit Patel committee report, the RBI formally adopted the Consumer Price Index (CPI-Combined or CPI-C) as the key measure (nominal anchor) for its inflation targeting framework, starting in 2016. The government formalized this by amending the RBI Act, setting a target CPI inflation rate of 4% within a band of +/- 2%.
. Therefore, the CPI is the current primary measure used for guiding India's monetary policy.
Information Booster:
. The CPI measures changes in prices of goods and services purchased by households for consumption, better reflecting the cost of living for the general public.
. WPI primarily tracks the prices of goods at the wholesale level and does not include services, which is a major limitation for a comprehensive inflation measure for a services-led economy like India.
. The Monetary Policy Committee (MPC) of the RBI meets regularly to decide policy rates (like the Repo rate) based on current and projected CPI inflation levels.