With reference to the Indian Economy, consider the following statements:1.The base effect is a phenomenon where the current period's economic performance or data is influenced by the weather conditions during that period.2.Food and Beverages have high weightage in the CPI basket than the milk and products.Select the correct statements using the codes given below:

Q. With reference to the Indian Economy, consider the following statements:
1.The base effect is a phenomenon where the current period’s economic performance or data is influenced by the weather conditions during that period.
2.Food and Beverages have high weightage in the CPI basket than the milk and products.
Select the correct statements using the codes given below:

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: B

Notes:

Explanation –

Statement 1 is incorrect. The base effect relates to inflation in the corresponding period of the previous year. If the inflation rate was too high in the corresponding period of the previous year, then even a smaller rise in the Price Index will give a low rate of inflation and vice-versa.

Statement 2 is correct. Weight of different products in CPI basket– Food and Beverages (54.18%), Cereals and product (12.35%), Milk and products (7.72%), Spices (3.11%), Education (3.46%), Oils and fats (4.21%).

Source: ForumIAS

Post-Mains Strategy Session by Mr. Ayush Sinha | ForumIAS