Question 1

Two statements are provided below. Decide which of the given options presents the most appropriate relationship between the two:

Statement I: The current trend indicates that food and vegetable inflation continues to be a pain point. Food inflation rose to 7.79% in June from 7.47%, and vegetable inflation rose to 14.74% from 10.85%. In the weeks ahead, the volatile food inflation will determine the course of overall inflation.

Statement II: For RBI too, the trend is a concern since under the current agreement with the government, if the inflation exceeds 2%, it'll have to explain to the government why it could not be contained (the lower limit is 2%).

Solution

The first paragraph presents the inflation scenario, and the second presents a potential outcome of the scenario (RBI having to submit an explanation to the government due to surging inflation), therefore, option B is the correct answer. Option A is incorrect as the effect is not direct. Option C is also incorrect because the second paragraph does not illustrate upon the first. Option D states RBI's 'inefficiency,' which is an unfounded conclusion. Option E is wrong as the second paragraph is not a 'remedy.'