Taxes are a fiscal-policy instrument; the other three belong to monetary policy — option 1.

The distinction. Fiscal policy is the government’s use of its revenue and expenditure to influence the economy, and it is set out in the Budget. Monetary policy is the central bank’s management of the money supply and the cost of credit.

Options 2, 3 and 4 are all RBI instruments: the Cash Reserve Ratio is the cash banks must hold with the RBI, the Bank Rate is the rate at which the RBI lends long-term to banks, and a credit ceiling is a selective control limiting how much may be lent for particular purposes.

How the fiscal tools work. In a downturn, the government may cut taxes and raise expenditure — an expansionary or deficit budget — putting purchasing power into people’s hands and creating demand directly. In a boom, or against inflation, it may raise taxes and curb spending, a contractionary stance. Taxation also serves redistribution, through progressive income tax, and correction, through duties on tobacco and other harmful goods.

Why both are needed. Monetary policy acts quickly but indirectly, through the willingness of banks to lend and of firms to borrow; fiscal policy acts slowly, because budgets are annual, but directly and with certainty. The two are coordinated, and the FRBM Act, 2003 sets targets for the fiscal deficit that constrain how freely fiscal policy can be used.

Hence, the answer is Taxes.