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Q29 (CDS-I/2024) Economy › Money, Banking & Inflation › Monetary aggregates Answer Verified

Which of the following are included in M1 definition of money for the Indian economy?

Result
Your answer: —  Â·  Correct: D
Explanation

In the Indian economy, the Reserve Bank of India (RBI) defines the narrow money aggregate M1 as the sum of currency with the public, demand deposits with the banking system, and 'other' deposits with the RBI [1]. Currency with the public includes all notes and coins held by people [1]. Demand deposits consist of balances in current accounts and the demand liability portion of savings accounts, as these can be withdrawn on demand via cheques [4]. While some sources simplify M1 as currency plus demand deposits [3], official RBI definitions and detailed academic texts clarify that 'other' deposits with the RBI—which include deposits from quasi-government institutions, foreign central banks, and international agencies like the IMF—are also a constituent part [1]. Therefore, currency with the public, demand deposits, and other deposits with the RBI are all included in M1.

Sources

  1. [1] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 3: Money and Banking > Legal Definitions: Narrow and Broad Money > p. 48
  2. [4] https://gacbe.ac.in/pdf/ematerial/18MEC41C-U1.pdf
  3. [3] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > TOOLS TO MEASURE MONEY SUPPLY > p. 158
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