Consider the following statements:

1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI).

2. The WPI does not capture changes in the prices of services, which CPI does.

3. Reserve Bank of India has now adopted WPI as its key measure of inflation and to decide on changing the key policy rates.

Which of the statements given above is/are correct?

The correct option is 1 and 2 only.

To understand why this is the correct choice, let us analyze each of the given statements step-by-step:

1. Weightage of food in CPI vs. WPI (Statement 1):
The Consumer Price Index (CPI) measures changes in the price level of a basket of consumer goods and services purchased by households. Because food is a primary and essential consumption item for households, it is given a very high weightage in the CPI basket (approximately 45.86% for Food and Beverages in CPI Combined).
On the other hand, the Wholesale Price Index (WPI) measures the prices of goods at the wholesale level (before they reach retail consumers). In the WPI basket, primary food articles constitute only about 15.26% of the weight (and even when including manufactured food products, the total weight is around 24.4%). Therefore, the weightage of food in CPI is indeed higher than that in WPI, making Statement 1 correct.

2. Capture of prices of services (Statement 2):
WPI is designed to track price movements of physical commodities/goods traded in bulk at the wholesale level. It does not include the service sector. CPI, however, is designed to represent retail consumption, which includes both physical commodities and services such as education, healthcare, transportation, communication, and housing. Thus, WPI does not capture changes in the prices of services, whereas CPI does, making Statement 2 correct.

3. Reserve Bank of India (RBI) measure of inflation (Statement 3):
Historically, the RBI did use WPI as its headline measure of inflation for making monetary policy decisions. However, in April 2014, following the recommendations of the Urjit Patel Committee, the RBI shifted its key measure of inflation to CPI (Combined). This shift was made because CPI directly reflects the cost of living and inflation faced by the end consumers (including services), unlike WPI. Therefore, WPI is no longer the key measure used by the RBI to decide on changing policy rates, making Statement 3 incorrect.

Since Statements 1 and 2 are correct, and Statement 3 is incorrect, the correct choice is "1 and 2 only".