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CA Foundation · Business Economics · Indian Economy

Which of the following best describes the primary objective of India's Monetary Policy Committee (MPC) as per the Reserve Bank of India Act, 1934?

The Monetary Policy Committee's primary objective is to maintain price stability while keeping economic growth in view. This dual mandate, established under the RBI Act, reflects India's commitment to achieving both macroeconomic stability and development. Price stability is the primary focus, but growth objectives are also considered.

  1. ATo maximize employment and economic growth without any regard to inflation
  2. BTo maintain price stability while keeping in mind the objective of growthCorrect
  3. CTo ensure that all banks maintain minimum capital adequacy ratios
  4. DTo directly control the exchange rate of the Indian rupee against foreign currencies

Explanation

The RBI Act (2016 amendment) mandates the MPC to maintain price stability while being mindful of the growth objective. This dual mandate reflects the balance between controlling inflation and supporting economic development. Option 0 ignores inflation control; Option 2 relates to banking regulation rather than monetary policy; Option 3 is incorrect as the RBI influences rather than directly controls exchange rates.

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