According to the structuralist view of inflation, which of the following best describes the pricing mechanism for manufactured commodities?

Prices are determined by the cost of production plus a profit markup.

Prices are solely determined by the global supply of raw materials.

Prices are primarily determined by fluctuations in consumer demand.

Prices are fixed by the government to ensure industrial stability.

What is the primary rationale for using a countercyclical indirect tax policy on fuel to control inflation?

To mitigate cost-push inflationary pressures by reducing input costs for industries.

To directly influence the demand for manufactured goods through price signals.

To increase government revenue during periods of high economic growth.

To discourage the consumption of fossil fuels for environmental sustainability.

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21 July 2026

Rising inflation in India

Inflation is a core macroeconomic indicator frequently examined in GS3, and the inclusion of specific structuralist theories and policy recommendations provides actionable content for analytical answers on economic management.

Notes

Wholesale Price Index (WPI) inflation in India reached nearly 10% in June, following a sharp increase starting in March.
WPI is a weighted average of primary articles (food, minerals), fuel and power, and manufactured products.
Michal Kalecki's structuralist theory distinguishes between primary commodity prices (demand-determined) and industrial prices (cost-determined).
Primary commodities: Supply is relatively fixed; price fluctuations are driven by demand-supply mismatches (e.g., impact of monsoon on food production).
Manufactured commodities: Supply is elastic due to excess industrial capacity; prices are determined by production costs plus a profit markup (cost-push inflation).
Material costs, particularly fuel and power, are primary drivers of manufactured inflation in India, as wage bargaining power is limited.
Food inflation is significantly influenced by supply shocks, such as droughts caused by the El Niño effect.
Policy recommendations include investing in irrigation infrastructure to reduce dependence on monsoons and utilizing countercyclical indirect tax policies on fuel to manage cost-push inflation.

Part of a longer story

This is day 3 of 4 in Wholesale and Retail Inflation Trends, which has been running since 15 July 2026. Reading it whole is usually worth more than reading today alone — the exam asks how something developed.

Questions

Distinguish between demand-pull and cost-push inflation in the context of the Indian economy. How do structural factors influence these two types of inflation? 150 words

Attempt this — 150 words in 8 min

0 / 150 words 8:00
Analyze the structural causes of rising WPI inflation in India. Discuss the efficacy of supply-side interventions and fiscal policy measures in mitigating inflationary pressures on the economy. 250 words

Attempt this — 250 words in 11 min

0 / 250 words 11:00

Prelims

According to the structuralist view of inflation, which of the following best describes the pricing mechanism for manufactured commodities?

What is the primary rationale for using a countercyclical indirect tax policy on fuel to control inflation?

Syllabus

Topics

Sources

Why inflation is rising in India

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