In India, official inflation figures have traditionally been calculated on the basis of which of the following price indexes?

Introduction / Context:
This question tests basic knowledge of how inflation has been measured in India. Inflation represents the general rise in prices over time, and different indexes can be used to measure it, such as the Wholesale Price Index and the Consumer Price Index. For many years, discussions of headline inflation in India primarily used the Wholesale Price Index, especially in older exam material, so understanding this background is important.

Given Data / Assumptions:

• The question is about India's inflation measurement.
• It asks which index has traditionally formed the basis for inflation figures.
• Options are WPI, CPI, CRR and Sensex.
• We are dealing with conventional exam style GK, which usually reflects long standing practices.

Concept / Approach:
Inflation can be measured at the wholesale or retail level. The Wholesale Price Index tracks price changes at the wholesale stage for a basket of goods. The Consumer Price Index measures retail prices consumers pay. Historically, India often used WPI as the main reference for inflation in policy discussions and newspapers, especially before CPI based inflation gained prominence in more recent years. The CRR is a monetary policy tool, and Sensex is a stock market index, not a price index of goods and services.

Step-by-Step Solution:
Step 1: Read the options and identify which ones are actual price indexes of goods and services. Step 2: Recognise that both WPI and CPI are price indexes, while CRR and Sensex are not. Step 3: Recall that traditionally India reported its main inflation figure using the Wholesale Price Index, especially in older government reports and economic surveys. Step 4: Understand that the Consumer Price Index has become more important in recent policy communication, but the question reflects the long established practice. Step 5: Therefore, select Wholesale Price Index (WPI) as the correct answer.

Verification / Alternative check:
You can verify this by recalling older Economic Survey summaries and budget analyses, where inflation was commonly quoted as WPI inflation, for example "WPI inflation declined to X percent". Only in later years did CPI based inflation start to dominate headlines. Since exam questions of this style often draw from long term practice, WPI is the safer and historically accurate choice.

Why Other Options Are Wrong:
Consumer Price Index (CPI): While CPI is now widely used by the Reserve Bank of India for inflation targeting, the question asks about traditional basis in India, which points to WPI in the context of exam oriented GK.
Cash Reserve Ratio (CRR): This is the percentage of deposits that commercial banks must keep with the central bank; it is a monetary policy tool, not a price index.
Sensitive Index (Sensex): Sensex is a stock market index representing share prices on the Bombay Stock Exchange, not a measure of general price inflation in the economy.

Common Pitfalls:
A common mistake is to over focus on very recent policy changes and choose CPI automatically without considering the wording "on the basis of which of the following indexes" in a traditional GK context. Another pitfall is confusion between financial market indicators like Sensex and real economy indicators like inflation. Keeping clear distinctions between these concepts helps avoid such errors.

Final Answer:
In India, inflation has traditionally been calculated and reported on the basis of the Wholesale Price Index (WPI).