ISS 2016 Statistics Paper-2 Solution: Question 75 (CPI Base Year and Weights)

We're continuing our question-by-question walk through the ISS (Indian Statistical Service) 2016 Statistics Paper-2 previous year paper. If you've been following along, this is Question 75 of 80 in the objective section, and it takes us into a topic that shows up almost every year in some form: the construction of the Consumer Price Index (CPI)used by the Government of India.

Quick Summary

• Topic: Consumer Price Index (Rural, Urban, Combined) — base year and weighting diagram

• Question Reference: ISS 2016 Statistics Paper-2, Question 75

• Correct Answer: (c) Both 1 and 2

Before we solve it, let's restate the question exactly as it appears in the test booklet.

Question 75.Which of the following is/are correct for Consumer Price Index (Rural, Urban, Combined)?

1. Base year is 2012

2. Weights have been derived from the Consumer Expenditure Survey conducted by NSSO during 2011-2012

Select the correct answer using the code given below:

• (a) 1 only

• (b) 2 only

• (c) Both 1 and 2

• (d) Neither 1 nor 2

Step 1: Understand what "Consumer Price Index (Rural, Urban, Combined)" actually is

Before touching the two statements, a complete beginner needs to know what this index even measures. The Consumer Price Index tracks how the average price level of a fixed "basket" of goods and services that ordinary households buy — food, fuel, clothing, housing, education, health care, and so on — changes over time compared to a chosen reference period.

In India, this particular CPI series is published separately for three categories:

• CPI-Rural — reflects consumption patterns of rural households

• CPI-Urban — reflects consumption patterns of urban households

• CPI-Combined — a weighted merger of the rural and urban indices, representing the country as a whole

This all-India CPI (Rural/Urban/Combined) is compiled and released every month by the National Statistical Office (NSO), earlier known as the Central Statistics Office (CSO), under the Ministry of Statistics and Programme Implementation (MoSPI). It is distinct from the older CPI series meant for specific worker groups, such as CPI-Industrial Workers (CPI-IW) or CPI-Agricultural Labourers (CPI-AL), which are compiled by the Labour Bureau and use different base years and different weighting schemes altogether. A lot of confusion in MCQs of this type comes from mixing up these different CPI series, so always first identify which CPI the question is asking about.

Step 2: Work out whether Statement 1 is correct — "Base year is 2012"

A "base year" in any index number is simply the reference year whose price level is fixed at 100, so that every other year's index can be expressed as a percentage of that base. If the index for the current month is, say, 140, it means prices have risen by 40% relative to the base year.

For a beginner, it helps to see this as a simple formula. If P0 is the price level in the base year and Pt is the price level in the year we're measuring, then:

Index in year t = (Pt / P0) × 100

By definition, when t is the base year itself, Pt = P0, so the index value is exactly 100 in the base year.

Now, historically, the all-India CPI (Rural/Urban/Combined) series was first launched in January 2011 with base year 2010 = 100. However, this series was later revised and rebased, and the currently used official series — the one in force at the time this question was being asked and still the one referred to in current publications — uses base year 2012 = 100. This rebasing exercise is a normal, periodic practice: index numbers are rebased every several years so that the consumption basket and reference prices stay representative of how people are actually spending their money, since spending habits shift noticeably over a decade.

So Statement 1 — "Base year is 2012" — is correct.

Step 3: Work out whether Statement 2 is correct — weights from the NSSO Consumer Expenditure Survey of 2011-12

This is the part that trips up a lot of students, so let's build it up slowly from first principles, exactly the way it would be explained to someone seeing index numbers for the first time.

A CPI is not computed from the price of just one item. It's a weighted average of the price changes of hundreds of individual items (cereals, pulses, vegetables, fuel, rent, clothing, and so on). "Weighted" means that an item which takes up a bigger share of a typical household's monthly spending gets a bigger weight in the index, so that if its price rises a lot, the overall CPI moves a lot too — and if a rarely-purchased item's price changes, it barely nudges the index.

In formula terms, for a Laspeyres-type weighted index (the standard construction used for CPI):

CPI = [ Σ (wi × (pi,t / pi,0)) ] / Σ wi

where wi is the expenditure weight of item i,pi,t is its price in the current period, and pi,0 is its price in the base period.

So the crucial question is: where do these weights wi come from? They can't be guessed — they have to come from an actual survey of how much households spend on each item. For the CPI (Rural/Urban/Combined) series with base year 2012, these expenditure weights were derived from the Consumer Expenditure Survey (CES) conducted by the National Sample Survey Office (NSSO)during 2011-12 (this corresponds to the 68th round of the NSS). That survey collected detailed household-level spending data across the country, and the resulting "weighting diagram" — the list of items along with their percentage weight in total expenditure — was used to construct this CPI series.

Pro Tip: Whenever an MCQ pairs a "base year" with a "source survey year," check that the survey year logically precedes or overlaps the base year — a weighting diagram has to be built from expenditure data collected around the same period the index is being anchored to. Here, the 2011-12 Consumer Expenditure Survey feeding into a 2012 base year is internally consistent, which is itself a strong sanity check you can use even if you don't remember the exact survey name. The way this pairing is usually drilled into students preparing for ISS and similar exams is to build a small timeline table for every official index — launch year, base year, and the survey/data source behind the weights — rather than memorising isolated facts; once you've done that for CPI, WPI, and IIP side by side, these "match the base year to the survey" questions stop being tricky.

So Statement 2 — weights derived from the NSSO Consumer Expenditure Survey of 2011-12 — is also correct.

Step 4: Combine the two statements and pick the final answer

Since we've independently verified that:

• Statement 1 (base year is 2012) is correct, and

• Statement 2 (weights from the NSSO Consumer Expenditure Survey, 2011-12) is correct,

the only option that captures "both statements true" is option (c) —Both 1 and 2.

This matches the official answer key for Series A of the ISS 2016 Statistics Paper-2 test booklet, which also lists the answer to Question 75 as (c). Our independently derived answer and the official key agree, so there's no discrepancy to flag here.

Why This Question Matters

Questions like this one test something beyond rote memorisation — they test whether you understand how an index number is actually built: a reference base period, a representative item basket, and expenditure-based weights pulled from real survey data. In the ISS Paper-2 syllabus, applied statistics questions on official index numbers (CPI, WPI, IIP) appear almost every year, and they're highly scoring because, once you know the underlying logic of weighted indices rather than just the facts, you can often eliminate wrong options even if you've forgotten one specific detail. Treating "which survey, which year, which base" as a structured fact-triplet rather than three separate trivia points is what turns this from a guessing question into a nearly guaranteed mark.

Frequently Asked Questions

What is the difference between CPI (Rural/Urban/Combined) and CPI-Industrial Workers (CPI-IW)?

CPI (Rural/Urban/Combined) is the general all-India index compiled by the National Statistical Office for the whole population, covering both rural and urban consumption baskets. CPI-IW, by contrast, is compiled by the Labour Bureau specifically to track the cost of living for industrial workers and is used, among other things, for dearness allowance calculations for that group. They use different base years and different weighting surveys, so never assume a fact about one applies to the other.

Why does the base year of an index need to be revised periodically?

Consumption patterns and relative prices change over time — people spend proportionally more on some categories (like mobile services or processed food) and less on others as the economy develops. If the base year and its weights are not updated, the index slowly stops reflecting how people actually spend, so statistical agencies periodically rebase the series using fresh expenditure survey data.

What exactly is a "weighting diagram" in the context of CPI?

A weighting diagram is simply the complete list of items (and item groups) included in the CPI basket, each assigned a percentage weight that reflects its share in total household expenditure during the base survey period. These weights are what convert individual item price changes into one single overall index number.

Is the Consumer Expenditure Survey the same thing as the Consumer Price Index?

No. The Consumer Expenditure Survey (CES) is a separate household survey, conducted by the NSSO, that collects data on how much households spend on various goods and services. The CPI then uses the output of that survey — the expenditure shares — as weights when combining individual price indices into the overall CPI number. The CES is an input; the CPI is the output.

Why is it useful to memorise the exact survey round (2011-12) rather than just "an NSSO survey"?

ISS Paper-2 MCQs frequently test precision by offering a plausible but incorrect year (for example, 2009-10 or 2017-18) as a distractor. Knowing the exact round lets you immediately reject near-miss options instead of second-guessing a vaguely remembered fact under exam time pressure.

How should I revise index-number topics like this for the ISS exam?

Build a one-page comparison table covering CPI, WPI, and IIP with columns for compiling agency, base year, source survey, and periodicity of release. Revising this table a few times close to the exam is far more effective than re-reading paragraphs, since most MCQs on this topic are really just testing whether you can correctly match a fact to the right index.

If anything in this solution wasn't clear, or if you spotted a different way to reason through it, drop a comment below — working through the doubt together is often the fastest way to make it stick. And if you know a fellow ISS aspirant who's grinding through the same previous year papers, feel free to share this post with them.