# Economic Survey 2017-18 Questions: Prices and Inflation

Jan 30, 2018 17:55 IST
Economic Survey 2017-18 Questions Prices and Inflation

Economic Survey 2017-18 based questions have been provided here for the IAS Prelims Exam 2018. The questions are based on the chapter- prices and inflation of the Economic Survey 2017-18 can be asked in the IAS Prelims Exam 2018.

In the last few years, questions based on the topics of Economic Survey of the respective year have been asked IAS Exam as well in various State PCS Exams. So, it is very important to cover such questions during IAS preparation.

Economic Survey 2017-18 Analysis: Prices and Inflation

1. Consider the following statements regarding the Producer Price Index (PPI):
1. The Government had set up a Working Group under the Chairmanship of Professor B. N. Goldar on 21st August 2014 to suggest the methodology for introducing Producer Price Index (PPI) in India.
2. The Producer Price Index (PPI) measures the average change in the prices of goods and services, either as they leave the place of production called Output PPI or as they enter the production process called Input PPI.
3. PPI contrasts with other measures such as the Consumer Price Index (CPI) which measures changes in prices from buyers or consumers perspective.

Which of the above statements is/are correct?
a. 2 only
b. 1 and 2
c. 2 and 3
d. 1, 2 and 3

Explanation:

The Government had set up a Working Group under the Chairmanship of Professor B. N. Goldar on 21st August 2014 to suggest the methodology for introducing Producer Price Index (PPI) in India. The Working Group submitted its report on 31 August 2017.

The Producer Price Index (PPI) measures the average change in the prices of goods and services, either as they leave the place of production called Output PPI or as they enter the production process called Input PPI. Thus, the output indices measure the average change in prices that producers receive for their outputs while the input indices measure the average change in prices that producers pay for their inputs. PPI contrasts with other measures such as the Consumer Price Index (CPI) which measures changes in prices from buyers or consumers perspective.

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2. Consider the following statements regarding the Housing Price Index:
1. The Housing Price Indices (HPIs) are a broad measure of the movement of residential property prices observed within a geographic boundary.
2. The first official housing price index for the country named ‘NHB RESIDEX’ was launched in July 2007 by the National Housing Bank (NHB).

Which of the above statements is/are correct?
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither 1 nor 2

Explanation:

The Housing Price Indices (HPIs) are a broad measure of the movement of residential property prices observed within a geographic boundary. The first official housing price index for the country named ‘NHB RESIDEX’ was launched in July 2007 by the National Housing Bank (NHB). Over time, the base year has been revised to FY 2012-13 to ensure capturing the latest information and accurately reflect the current economic situation in the country. Currently, National Housing Bank is publishing NHB RESIDEX for 50 cities on a quarterly basis with FY 2012-13 as the base year. Among 50 cities covered are 18 State/UT capitals and 37 Smart Cities. NHB is not computing the composite all India housing price index as of now.

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3. Which of the following states has the lowest inflation in the country?
a. Odisha
c. Bihar
d. Chhattisgarh

Explanation:

Many States have witnessed a sharp fall in CPI inflation during 2017-18 (Apr-Dec). Inflation in seventeen States was below 4 per cent in FY 2017-18 (Apr-Dec) as compared to only three States in 2016-17 (Apr-Dec). Five States, namely, Jammu & Kashmir, Kerala, Delhi, Tamil Nadu and Himachal Pradesh recorded inflation of more than 4 per cent in FY 2017-18 (Apr-Dec) whereas nineteen States had inflation of more than 4 per cent in FY 2016-17 (Apr-Dec). Ten States had an inflation rate lower than All India average for FY 2017-18 (Apr-Dec) with Odisha having the lowest inflation followed by Uttar Pradesh, Bihar and Chhattisgarh, respectively.

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4. Headline inflation or General inflation measured by which of the following indices?
a. Wholesale Price Index
b. Consumer Price Index
c. Producer Price Index
d. All of the above

Explanation:

Recently, Indian economy is witnessing a gradual transition from a period of high and variable inflation to more stable prices in the last four years. Headline inflation measured by the Consumer Price Index (CPI) has remained under control for the fourth successive year. Financial year (FY) 2017-18 began with an annual inflation rate of 3.0 per cent. In the first two quarters of FY 2017-18, there was a moderate increase in prices, resulting in a low level of inflation of 2.2 per cent in quarter one and 3.0 per cent in quarter two. The headline inflation rate reached its series low of 1.5 per cent in the month of June 2017. Food inflation measured by the Consumer Food Price Index (CFPI) declined to a low of 1.2 per cent during the FY 2017-18 (April-December).

The average inflation based on the new series (2011-12) of Wholesale Price Index (WPI) stood at 1.7 per cent in 2016-17 compared to (-) 3.7 per cent in 2015-16 and 1.2 per cent in 2014-15. WPI based inflation for FY 2017-18 (Apr-Dec) stood at 2.9 per cent.

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4. Consider the following statements regarding the Price Stabilization Fund (PSF):
1. The Price Stabilization Fund (PSF) was set up in 2014-15 under the Department of Agriculture, Cooperation & Famers Welfare (DAC&FW) to help regulate the price volatility of important Agri-horticultural commodities.
2. The scheme provides for maintaining a strategic buffer of aforementioned commodities for subsequent calibrated release to moderate price volatility and discourages hoarding and unscrupulous speculation.
3. The fund allocated under PSF has been primarily utilized towards building the buffer of up to 20 lakh tonnes of pulses.

Which of the above statements is/are correct?
a. 2 only
b. 1 and 2
c. 2 and 3
d. 1, 2 and 3

Explanation:

The Price Stabilization Fund (PSF) was set up in 2014-15 under the Department of Agriculture, Cooperation & Famers Welfare (DAC&FW) to help regulate the price volatility of important Agri-horticultural commodities like onion, potatoes and pulses were also added subsequently. The PSF scheme was transferred from DAC&FW to the Department of Consumer Affairs (DOCA) with effect from 1st April 2016.

The scheme provides for maintaining a strategic buffer of aforementioned commodities for subsequent calibrated release to moderate price volatility and discourages hoarding and unscrupulous speculation. For building such stock, the scheme promotes direct purchase from farmers/farmers’ association at farm gate/Mandi. The PSF is utilized for granting interest-free advance of working capital to Central Agencies, State/UT Governments/Agencies to undertake market intervention operations. Apart from domestic procurement from farmers/wholesale mandis, the import may also be undertaken with support from the Fund.

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