In India, which one of the following is responsible for maintaining price stability by controlling inflation?
[UPSC Civil Services Exam – 2022 Prelims]
(a) Department of Consumer Affairs
(b) Expenditure Management Commission
(c) Financial Stability and Development Council
(d) Reserve Bank of India
- Reserve Bank of India is India’s central bank has key function to keep check on the inflation by use of monetary policy in forms of qualitative and quantitative measures.
- In 2016, the Monetary Policy Committee (MPC) was established to enhance transparency and accountability in the decision-making process of monetary policy.
- The committee is responsible for determining the policy interest rate required to achieve the inflation target, which is set once in five years by the Government of India in consultation with the Reserve Bank.
- The MPC comprises of six members, with three from the RBI and three selected by the government, and is chaired by the Governor of the RBI. The current inflation target is 4% with a tolerance range of -2/+2.