In India, the monetary policy is controlled by ______ .
Reserve Bank of India
Understanding Monetary Policy Control in India
Monetary policy is a set of tools used by a nation's central bank to control the overall money supply and achieve targets that promote sustainable economic growth. In India, the control of monetary policy is vested with a specific institution.
Let's examine the options provided:
- Finance Minister: The Finance Minister is responsible for fiscal policy, which involves government spending and taxation. While fiscal and monetary policies are coordinated, the Finance Minister does not directly control monetary policy.
- Union Government: The Union Government sets the overall economic direction and approves major policies, but the day-to-day implementation and operational control of monetary policy are delegated to an autonomous body.
- Reserve Bank of India: The Reserve Bank of India (RBI) is the central banking institution of India. It is mandated with the responsibility of conducting monetary policy to achieve objectives such as maintaining price stability while keeping in mind the objective of growth. The RBI Act, 1934, empowers the RBI to regulate the issue of banknotes and the keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage. The Monetary Policy Committee (MPC) within the RBI is specifically tasked with deciding the policy interest rates required to achieve the inflation target.
- Finance Ministry: The Finance Ministry is a department within the Union Government dealing with financial and economic matters, including fiscal policy. Similar to the Finance Minister and Union Government, it does not directly control monetary policy which is the domain of the central bank.
Based on the roles and responsibilities defined in the Indian economic framework, the Reserve Bank of India is the autonomous body that controls monetary policy in India through its Monetary Policy Committee and various policy tools.
Important Questions from Money and Banking
Which one of the following is likely to be the most inflationary in its effects?
Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?
Consider the following statements :
The effect of devaluation of a currency is that it necessarily
1. improves the competitiveness of the domestic exports in the foreign markets
2. increase the foreign value of domestic currency
3. improves the trade balance
Which of the above statements is/are correct?
Indian Government Bond Yields are influenced by which of the following?
1. Actions of the United States Federal Reserve
2. Actions of the Reserve Bank of India
3. Inflation and short-term interest rates
Select the correct answer using the code given below.
With reference to “Urban Cooperative Banks" in India, consider the following statements :
1. They are supervised and regulated by local boards set up by the State Governments.
2. They can issue equity shares and preference shares.
3. They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966
Which of the statements given above is/are correct?
