With reference to inflation in India, which of the following statements is correct?
Controlling the inflation in India is the responsibility of the Government of India only
The Reserve Bank of India has no role in controlling the inflation
Decreased money circulation helps in controlling the inflation
Increased money circulation helps in controlling the inflation
Answer is Right!
Answer is Wrong!
This question was previously asked in
UPSC IAS – 2015
– Controlling inflation is a joint responsibility of the government and the central bank (RBI). The RBI is statutorily mandated to maintain price stability, often through monetary policy. Therefore, A and B are incorrect.
– Monetary policy tools aimed at controlling inflation typically involve reducing the money supply and credit availability or increasing interest rates, which leads to decreased money circulation (tight monetary policy). This curbs aggregate demand, helping to cool down inflationary pressures.
– Increased money circulation (loose or expansionary monetary policy) typically stimulates demand and can exacerbate inflation. Therefore, D is incorrect.