Core CPI inflation is generally lower than headline CPI inflation

Core CPI inflation is generally lower than headline CPI inflation because

food inflation is generally higher than non-food inflation

food prices fluctuate too widely over the year

food prices are controlled by the Government

share of food in consumption basket has been increasing over time

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC SO-Steno – 2017

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Option A is the most accurate explanation among the choices for why core CPI is *generally* lower than headline CPI. Headline CPI includes food and energy, while core CPI excludes them. When food inflation is high (which it often is in economies like India due to supply shocks, weather dependency, etc.), it pushes headline inflation up relative to core inflation.

Core inflation measures inflation excluding volatile items like food and energy. Headline inflation includes all items. If the excluded items (food and energy) experience higher price increases than the included items, then headline inflation will be higher than core inflation.

Option B is true, food prices do fluctuate widely, but the *reason* core is generally lower than headline is specifically when these fluctuations lead to high food inflation. Option C is generally incorrect; food prices are largely market-driven, though the government might intervene through procurement or subsidies for certain items. Option D, the share of food in the consumption basket, affects the *weight* of food in CPI calculation, not directly why core is lower than headline, although a large food share means food inflation has a significant impact on headline CPI.

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