Explanation:

Measures of money supply in India:

• The measures of money supply in India are classified into four categories M1, M2, M3 and M4 along with M0. This classification was introduced in April 1977 by Reserve Bank of India.
• Let’s discuss these one by one:

Reserve Money (M0):

• It is also known as High-Powered Money, monetary base, base money etc.
• M0 = Currency in Circulation + Bankers’ Deposits with RBI + Other deposits with RBI. It is the monetary base of economy.

Narrow Money (M1):

• M1 = Currency with public + Demand deposits with the Banking system (current account, saving account) + Other deposits with RBI.

M2:

• M2 = M1 + Savings deposits of post office savings banks

Broad Money (M3)

• M3 = M1 + Time deposits with the banking system
• M4 = M3 + All deposits with post office savings banks