Headline inflation refers to the change in value of all goods on the basket. On which basis is the headline inflation measured ?

The correct answer is C) Combined Consumer Price Index. Headline inflation is the change in the overall price level of the whole consumption basket, and in India that is measured by the Consumer Price Index (Combined), which covers both rural and urban households and all goods and services they consume.

• A) WPI: The Wholesale Price Index tracks prices at the wholesale level, excludes services, and is a producer-side measure. It is not the headline consumer inflation number.
• B) CPI-IW: This is compiled by the Labour Bureau for industrial workers only. It is a narrow, sector-specific index, not the headline measure.
• D) Urban CPI: Urban CPI is only one segment. Headline inflation requires the combined rural and urban series.

The core concept is the distinction between headline and core inflation. Core inflation excludes volatile food and fuel items. RBI's inflation-targeting framework, with its 4 percent target and a tolerance band, is anchored on CPI (Combined), which makes this a regular Economy and Mains monetary policy topic.

The CPI (Combined) base year has been revised over time, so check the current series when you revise.

Trap: Aspirants often pick WPI because it was the headline index in India before 2014, when the government shifted the anchor to CPI.