Consider the following statements Statement I In India Central Government determines the inflation t...........

Indian Economy Money and banking

Consider the following statements

Statement I : In India, Central Government determines the inflation target, in consultation with Reserve Bank of India, in terms of Consumer Price Index once in five years.

Statement II : At present, the Monetary Policy framework in India is operated by Central Government.

Which of the following is correct in respect of the above statements ?

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Both statement I and statement II are correct and statement II is the correct explanation for statement I

Both statement I and statement II are correct and statement II is not the correct explanation for statement I

Statement I is correct but statement II is incorrect

Statement I is incorrect but statement II is correct

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Explanation:

- Statement I: Correct. The inflation target in India is set by the Central Government, in consultation with the RBI, based on Consumer Price Index (CPI) for a period of five years as per the RBI Act, 1934 (amended in 2016).

- Statement II: Incorrect. The Monetary Policy framework is operated by the Reserve Bank of India, not the Central Government. The RBI, through the Monetary Policy Committee (MPC), takes decisions on policy rates.

- Option 3 correctly identifies that Statement I is correct and Statement II is incorrect.

- Other options are incorrect because they misstate who operates the monetary policy framework.

Option 3: Statement I is correct but Statement II is incorrect is the correct answer.