Multiple Choice Questions on Consider the following statements with reference to Inflation targeting by Reserve Bank of India RBI........... for UPSC Civil Services Examination (General Studies) Preparation

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Multiple Choice Questions

Consider the following statements with reference to Inflation targeting by Reserve Bank of India RBI...........

Economic Affairs Money Supply and Monetary Policy
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    Consider the following statements with reference to Inflation targeting by Reserve Bank of India (RBI)

    1. Determining targets for consumer price index (CPI) is part of Monetary Policy Committee (MPC) of RBI.
    2. Inflation target is set by the RBI on an annual basis.

    Select the correct statement.

    1 only

    Correct Answer

    2 only

    Incorrect Answer

    Both

    Incorrect Answer

    None

    Incorrect Answer
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    Explanation:
    • The Reserve Bank of India (RBI) through the Monetary Policy Committee (MPC) has set the objective of achieving the target for consumer price index (CPI) inflation of 4% within a band of +/- 2% (which implies a range of 2-6%), while supporting growth. 
    • In May 2016, the Reserve Bank of India (RBI) Act, 1934 was amended to provide a statutory basis for the implementation of the flexible inflation targeting framework.
    • The amended RBI Act also provides for the inflation target to be set by the Government of India, in consultation with the Reserve Bank, once in every five years. 

    Hence only statement 1st is correct.

    By: Shubham Tiwari
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    MPC is required to meet at least four times a year

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