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Q38 (IAS/2022) Economy › Money, Banking & Inflation › Inflation and policy Official Key

In India, which one of the following is responsible for maintaining price stability by controlling inflation ?

Result
Your answer: —  ·  Correct: D
Explanation

The correct answer is Option 4: Reserve Bank of India (RBI).

The Reserve Bank of India Act, 1934, was amended in 2016 to provide a statutory basis for the implementation of the Flexible Inflation Targeting Framework. Under Section 45ZB of the Act, the primary objective of the RBI’s monetary policy is to maintain price stability while keeping in mind the objective of growth. The RBI targets a Consumer Price Index (CPI) inflation rate of 4% with a tolerance band of +/- 2%.

  • Option 1 is incorrect as it focuses on consumer protection and monitoring essential commodity prices, not systemic monetary control.
  • Option 2 is incorrect as it deals with reviewing the government's expenditure pivot points.
  • Option 3 is incorrect as the FSDC focuses on financial sector development and stability across regulators, not inflation management.

Therefore, the RBI, through its Monetary Policy Committee (MPC) and tools like the Repo Rate, is the sole authority responsible for controlling inflation in India.

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Q. In India, which one of the following is responsible for maintaining price stability by controlling inflation ? [A] Department of Consume…
At a glance
Origin: Books + Current Affairs Fairness: Low / Borderline fairness Books / CA: 2.5/10 · 7.5/10

This is a 'Sitter'—a fundamental question that defines the baseline for clearing Prelims. It stems directly from the RBI Act amendment and the Monetary Policy Framework Agreement. If you get this wrong, you are likely reading the wrong sources or missing the core definitions of Indian Economy.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
In India, is the Reserve Bank of India responsible for maintaining price stability by controlling inflation?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.13 Monetary Policy > p. 60
Presence: 5/5
“As per the new monetary policy framework agreement, following are the important points: - • The objective of the monetary policy is to primarily maintain price stability, while keeping in mind the objective of growth• The monetary policy framework is operated by RBI• The inflation target is 4% with a band of +/- 2%• The inflation target is decided by the Government of India in consultation with RBI. The central government has notified the above inflation target for the period till March 31, 2026.”
Why this source?
  • Explicitly states the primary objective of monetary policy is to maintain price stability.
  • States the monetary policy framework is operated by the RBI and specifies an inflation target (4% ±2%).
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.13 Monetary Policy > p. 59
Presence: 5/5
“Monetary Policy is the process by which monetary authority (RBI) of a country controls the creation and supply of money in the economy. Over time, the objectives of monetary policy in India have evolved to include maintaining price stability, ensuring adequate flow of credit to productive sectors of the economy for”
Why this source?
  • Defines monetary policy as the process by which the monetary authority (RBI) controls creation and supply of money.
  • Notes that maintaining price stability is an objective of monetary policy.
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.14 RBI and its Functions > p. 65
Presence: 5/5
“The objective of RBI is "to regulate the issue of Bank notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage; to have a modern monetary policy framework to meet the challenge of an increasingly complex economy, to maintain price stability while keeping in mind the objective of growth; to maintain macroeconomic stability and financial stability." The RBI affairs are governed by a central board of directors (Maximum 21 in number including the governor and four deputy governors who are also on the central board) who are appointed by the government of India in keeping with the Reserve Bank of India Act 1934 for a period of 4 years.”
Why this source?
  • Lists RBI's objective to maintain price stability while considering growth and to secure monetary stability.
  • Positions RBI as the institution operating the currency and credit system to the country's advantage.
Statement 2
In India, is the Department of Consumer Affairs responsible for maintaining price stability by controlling inflation?
Origin: Web / Current Affairs Fairness: CA heavy Web-answerable

Web source
Presence: 5/5
"policy has focussed on maintaining price stability, ensuring adequate flow of credit to sustain the growth momentum, and securing financial stability."
Why this source?
  • Explicitly states the Reserve Bank's policy focus: 'maintaining price stability'.
  • Describes RBI as the central bank pursuing core functions and powers that enable financial stability and policy implementation — indicating RBI, not a consumer affairs department, handles price stability.
Web source
Presence: 5/5
""the primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth"."
Why this source?
  • Defines the primary objective of monetary policy as maintaining price stability.
  • Notes adoption of flexible inflation targeting under the RBI Act, assigning primacy to price stability — a monetary policy function of the RBI.
Web source
Presence: 4/5
"An inflation rate of 4 per cent over the medium term has now been successfully entrenched in the economic landscape. The experience with efficaciously maintaining price stability and the gains in credibility for monetary policy since the beginning of the inflation targeting framework in 2016 are reinforced..."
Why this source?
  • Describes an explicit inflation target (4%) and the experience of maintaining price stability under the inflation-targeting framework.
  • References the Monetary Policy Committee (MPC), which is the mechanism for setting monetary policy and inflation targets — functions of the RBI.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.13 Monetary Policy > p. 60
Strength: 5/5
“As per the new monetary policy framework agreement, following are the important points: - • The objective of the monetary policy is to primarily maintain price stability, while keeping in mind the objective of growth• The monetary policy framework is operated by RBI• The inflation target is 4% with a band of +/- 2%• The inflation target is decided by the Government of India in consultation with RBI. The central government has notified the above inflation target for the period till March 31, 2026.”
Why relevant

Defines the monetary policy objective as 'primarily maintain price stability' and says the monetary policy framework is operated by the RBI.

How to extend

A student could infer that responsibility for broad inflation control lies with the RBI (monetary authority), not necessarily with DCA; check institutional roles to compare.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.13 Monetary Policy > p. 59
Strength: 5/5
“Monetary Policy is the process by which monetary authority (RBI) of a country controls the creation and supply of money in the economy. Over time, the objectives of monetary policy in India have evolved to include maintaining price stability, ensuring adequate flow of credit to productive sectors of the economy for”
Why relevant

States monetary policy is the process by which the monetary authority (RBI) controls money supply and links it to objectives including maintaining price stability.

How to extend

Use this rule to judge whether an administrative ministry like DCA, rather than the RBI, would be the primary actor in controlling overall inflation.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.14 RBI and its Functions > p. 65
Strength: 5/5
“The objective of RBI is "to regulate the issue of Bank notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage; to have a modern monetary policy framework to meet the challenge of an increasingly complex economy, to maintain price stability while keeping in mind the objective of growth; to maintain macroeconomic stability and financial stability." The RBI affairs are governed by a central board of directors (Maximum 21 in number including the governor and four deputy governors who are also on the central board) who are appointed by the government of India in keeping with the Reserve Bank of India Act 1934 for a period of 4 years.”
Why relevant

Specifies RBI's objective to maintain price stability and describes RBI as the institution tasked with monetary stability and policy.

How to extend

Combine this institutional statement with knowledge of which agencies run monetary vs administrative schemes to assess DCA's role relative to RBI.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 12: Supply Chain and Food Processing Industry > 12.4.1Price Stabilization Fund (PSF) > p. 368
Strength: 4/5
“The Price Stabilization Fund (PSF) was set up in 2014-15 under the Department of Consumer Affairs to help regulate the price volatility of important agri-horticultural commodities like onion, potatoes and pulses were also added subsequently. The scheme provides for maintaining a strategic buffer of aforementioned commodities for subsequent calibrated release to moderate price volatility and discourages hoarding and unscrupulous speculation. For building such stock, the scheme promotes direct purchase from the farmers/farmers' association at farm gate/Mandi. The PSF is utilized for granting interest free advance of working capital to Central Agencies like NAFED (National Agricultural Cooperative Marketing Federation of India Ltd.) and SFAC (Small Farmers Agribusiness Consortium), State/UT Governments/Agencies to undertake market intervention operations.”
Why relevant

Describes the Price Stabilization Fund (PSF) set up under the Department of Consumer Affairs to regulate price volatility of specific agri commodities via buffer stocks and market interventions.

How to extend

A student can extend this to conclude DCA has targeted, commodity-level price-stabilization tools but not the economy-wide inflation control role of monetary policy.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > ENSURING RIGHTS OF CONSUMERS > p. 339
Strength: 4/5
“Ensuring rights of consumers is the responsibility of the Department of Consumer Affairs (DCA) under the Ministry of Consumer Affairs, Food and Public Distribution. In this regard, DCA deals with the following major Acts: \begin{picture}(20,10) \put(0,0){\line(1,0){10}} \put(10,0){\line(1,0){10}} \put(10,0){\line(1,0){10}} \put(10,0){\line(1,0){10}} \put(10,0){\line(1,0){10}} \put(10,0){\line(1,0){10}} \put(10,0){\line(1,0){10}} \put(10,0){\line(1,0){10}} \put(10,0){\line(1,0){10}} \put(10,0){\line(1,0){10}} • Implementation of Consumer Protection Act, 1986. • Implementation of Bureau of Indian Standards Act, 2016.”
Why relevant

States DCA is responsible for ensuring rights of consumers and implements consumer-related Acts, indicating a consumer-protection/administrative mandate.

How to extend

Use this to infer DCA's mandate is consumer welfare/administration rather than macroeconomic price stability, suggesting limited role in controlling overall inflation.

Statement 3
In India, is the Expenditure Management Commission responsible for maintaining price stability by controlling inflation?
Origin: Web / Current Affairs Fairness: CA heavy Web-answerable

Web source
Presence: 5/5
"Under the Reserve Bank of India Act, 1934 (as amended in 2016), RBI is entrusted with the responsibility of conducting monetary policy in India with the primary objective of maintaining price stability, while keeping in mind the objective of growth."
Why this source?
  • Explicitly states which institution is entrusted with monetary policy in India.
  • Identifies the primary objective of that institution as maintaining price stability (i.e., controlling inflation).
Web source
Presence: 5/5
""the primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth""
Why this source?
  • Reiterates the primary objective of monetary policy as maintaining price stability.
  • Notes adoption of flexible inflation targeting (FIT) and a numerical inflation target, showing monetary policy (RBI) is responsible for inflation control.
Web source
Presence: 4/5
"An inflation rate of 4 per cent over the medium term has now been successfully entrenched in the economic landscape. The experience with efficaciously maintaining price stability ... since the beginning of the inflation targeting framework in 2016 are reinforced by the retention of the target and the tolerance band."
Why this source?
  • Refers to the Monetary Policy Committee (MPC) and the entrenchment of a 4% inflation target, indicating responsibility for inflation control lies with monetary authorities (MPC/RBI).
  • Shows practical implementation and credibility of monetary policy in maintaining price stability.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.13 Monetary Policy > p. 60
Strength: 5/5
“As per the new monetary policy framework agreement, following are the important points: - • The objective of the monetary policy is to primarily maintain price stability, while keeping in mind the objective of growth• The monetary policy framework is operated by RBI• The inflation target is 4% with a band of +/- 2%• The inflation target is decided by the Government of India in consultation with RBI. The central government has notified the above inflation target for the period till March 31, 2026.”
Why relevant

States the objective of monetary policy is to maintain price stability and that the monetary policy framework is operated by the RBI (not by a commission).

How to extend

A student could infer that responsibility for price stability at the macro level lies with RBI (monetary authority) and check whether the Expenditure Management Commission is an RBI body or a different (fiscal/expenditure) entity.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.13 Monetary Policy > p. 59
Strength: 5/5
“Monetary Policy is the process by which monetary authority (RBI) of a country controls the creation and supply of money in the economy. Over time, the objectives of monetary policy in India have evolved to include maintaining price stability, ensuring adequate flow of credit to productive sectors of the economy for”
Why relevant

Defines monetary policy as the RBI's control over money supply and links the RBI to maintaining price stability.

How to extend

Use this to distinguish monetary (RBI) tools from fiscal/expenditure bodies—then verify whether the Expenditure Management Commission has monetary powers.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 4: Inflation > A. Fiscal Measures > p. 72
Strength: 4/5
“The Government uses fiscal measures to control inflation. The two main components of fiscal policy are government revenue and government expenditure. Under fiscal policy, the government (not RBI) controls inflation and in the following ways: • By reducing private spending (by enhancing taxes on private businesses), i.e. when the 1. government reduces private spending by increasing taxes, individuals decrease their total expenditure; and the money supply in the economy is reduced.• 2. By decreasing non-developmental government expenditure.• 3. By avoiding deficit financing as far as possible. Use of option 2 above may not be feasible all the time as the Government expenditure may be required for ongoing projects and managing strategic sectors like health, education, defence, etc.”
Why relevant

Explains that the government (fiscal policy), not the RBI, uses fiscal measures to control inflation through revenue and expenditure decisions.

How to extend

A student could treat the Expenditure Management Commission as a fiscal/expenditure-focused body and ask whether its remit (expenditure control) is consistent with direct inflation control powers.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Objectives of Fiscal Policy > p. 82
Strength: 4/5
“• 1. To achieve higher rate of economic growth, through the following measures: • Raising the ratio of saving (s) to income (y) by controlling consumption (c): a. b. Raising the rate of investment Encouraging the flow of spending in productive areas c. • 2. Price stability Government uses fiscal measures, such as taxation and public expenditure, to stabilise the prices and control inflation. Government also generates employment by speeding up infrastructure development. • 3.”
Why relevant

Lists 'price stability' as an objective of fiscal policy and states government uses taxation and public expenditure to stabilise prices.

How to extend

Combine this with knowledge that an 'Expenditure Management' commission would be fiscal in nature to assess whether such a commission might influence inflation indirectly via expenditure policy, even if not the primary inflation controller.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 12: Supply Chain and Food Processing Industry > 12.4.1Price Stabilization Fund (PSF) > p. 368
Strength: 3/5
“The Price Stabilization Fund (PSF) was set up in 2014-15 under the Department of Consumer Affairs to help regulate the price volatility of important agri-horticultural commodities like onion, potatoes and pulses were also added subsequently. The scheme provides for maintaining a strategic buffer of aforementioned commodities for subsequent calibrated release to moderate price volatility and discourages hoarding and unscrupulous speculation. For building such stock, the scheme promotes direct purchase from the farmers/farmers' association at farm gate/Mandi. The PSF is utilized for granting interest free advance of working capital to Central Agencies like NAFED (National Agricultural Cooperative Marketing Federation of India Ltd.) and SFAC (Small Farmers Agribusiness Consortium), State/UT Governments/Agencies to undertake market intervention operations.”
Why relevant

Gives an example (Price Stabilization Fund under Department of Consumer Affairs) where a government department intervenes to moderate price volatility of specific commodities.

How to extend

A student could use this as a model for how non-RBI bodies can affect prices in targeted ways, then check whether the Expenditure Management Commission has similar targeted powers or a broader mandate over general inflation.

Statement 4
In India, is the Financial Stability and Development Council responsible for maintaining price stability by controlling inflation?
Origin: Web / Current Affairs Fairness: CA heavy Web-answerable

Web source
Presence: 4/5
"policy has focussed on maintaining price stability, ensuring adequate flow of credit to sustain the growth momentum, and securing financial stability."
Why this source?
  • States that policy has focused on 'maintaining price stability' and describes the Reserve Bank’s core functions.
  • Implies responsibility for price stability lies with the Reserve Bank (central bank), not a separate council.
Web source
Presence: 5/5
"An inflation rate of 4 per cent over the medium term has now been successfully entrenched in the economic landscape. ... From the time after the Monetary Policy Committee (MPC) was constituted in September 2016, average CPI inflation ..."
Why this source?
  • References an explicit inflation target and the Monetary Policy Committee (MPC) created in 2016.
  • Shows inflation control (price stability) is an objective tied to the central bank's monetary policy framework (MPC).
Web source
Presence: 4/5
"It has been viewed that unlike price stability, financial stability is difficult to quantify, viz., setting out an explicit targeting framework for achieving policy objectives."
Why this source?
  • Contrasts price stability with financial stability, noting price stability can have explicit targeting.
  • Indicates central banks focus on price stability while financial stability is treated differently, suggesting different institutional roles.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 3: Money and Banking - Part II > 3.4 Financial Stability and Development Council (FSDC) > p. 133
Strength: 5/5
“With a view to strengthening and institutionalizing the mechanism for maintaining financial stability, enhancing inter-regulatory coordination and promoting financial sector development, the Financial Stability and Development Council (FSDC) was set up by the Government of India as the apex level forum in December 2010. FSDC is not a statutory body and was set up through a gazette notification. The Chairman of the Council is the finance minister and its members include the heads of financial sector Regulators (RBI, SEBI, PFRDA, IRDA), Chairperson of Insolvency and Bankruptcy Board of India (IBBI), Chief Economic Advisor and secretaries from ministry of finance, ministry of Information Technology and ministry of Corporate Affairs.”
Why relevant

States FSDC was set up to maintain financial stability, enhance inter-regulatory coordination and promote financial sector development — describing its mandate.

How to extend

A student could contrast this mandate with the task of maintaining price stability to see if responsibilities overlap or are assigned to a different institution.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.13 Monetary Policy > p. 60
Strength: 5/5
“As per the new monetary policy framework agreement, following are the important points: - • The objective of the monetary policy is to primarily maintain price stability, while keeping in mind the objective of growth• The monetary policy framework is operated by RBI• The inflation target is 4% with a band of +/- 2%• The inflation target is decided by the Government of India in consultation with RBI. The central government has notified the above inflation target for the period till March 31, 2026.”
Why relevant

Defines the objective of monetary policy as primarily to maintain price stability and states the monetary policy framework is operated by the RBI.

How to extend

Combine this with FSDC's mandate (snippet 1) to infer that price stability is likely an RBI responsibility rather than FSDC's.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > MONETARY POLICY REPORT AND FINANCIAL STABILITY REPORT > p. 173
Strength: 4/5
“The Reserve Bank of India (RBI) publishes Monetary Policy Report (MPR) after every 6 months to explain the sources and forecasts of inflation for the coming period of 6-18 months. The RBI also publishes Financial Stability Report (FSR) biannually which reflects an assessment of the sub-committee of the Financial Stability and Development Council (FSDC) on the risks to financial stability. (Before the examination, aspirants may benefit by reading the most recent MPR and FSR published by RBI.)”
Why relevant

Notes RBI publishes Monetary Policy Report on inflation and that the Financial Stability Report reflects an assessment of the FSDC sub-committee on risks to financial stability.

How to extend

Use this to separate roles: RBI handles inflation analysis and policy while FSDC/sub-committee assesses financial stability risks.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.13 Monetary Policy > p. 59
Strength: 4/5
“Monetary Policy is the process by which monetary authority (RBI) of a country controls the creation and supply of money in the economy. Over time, the objectives of monetary policy in India have evolved to include maintaining price stability, ensuring adequate flow of credit to productive sectors of the economy for”
Why relevant

Defines monetary policy as the process by which the monetary authority (RBI) controls money supply; objectives include maintaining price stability.

How to extend

A student could infer that instruments to control inflation (money supply control) are managed by RBI, not by a council focused on regulatory coordination.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.14 RBI and its Functions > p. 65
Strength: 5/5
“The objective of RBI is "to regulate the issue of Bank notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage; to have a modern monetary policy framework to meet the challenge of an increasingly complex economy, to maintain price stability while keeping in mind the objective of growth; to maintain macroeconomic stability and financial stability." The RBI affairs are governed by a central board of directors (Maximum 21 in number including the governor and four deputy governors who are also on the central board) who are appointed by the government of India in keeping with the Reserve Bank of India Act 1934 for a period of 4 years.”
Why relevant

Explicitly states RBI's objective includes maintaining price stability and financial stability, and that RBI is the monetary authority.

How to extend

This reinforces that price stability is an RBI objective; compare with FSDC's stated purpose to judge whether FSDC is the operational authority for inflation control.

Pattern takeaway: UPSC frequently tests 'Institutional Responsibility'. They confuse candidates by swapping the roles of the Central Bank (Monetary) with the Executive (Fiscal/Administrative). Always memorize the 'Preamble' or 'Objective Clause' of major statutory bodies (RBI, SEBI, CCI).
How you should have studied
  1. [THE VERDICT]: Sitter. Direct hit from NCERT Macroeconomics (Chapter 3) and standard texts like Vivek Singh (Chapter 2) or Nitin Singhania.
  2. [THE CONCEPTUAL TRIGGER]: The 'Monetary Policy Framework Agreement' (MPFA). The specific legal phrase 'primary objective of the monetary policy is to maintain price stability' is the key trigger.
  3. [THE HORIZONTAL EXPANSION]: Distinguish the roles: (1) RBI = General Inflation (CPI) via Repo Rate/Liquidity; (2) Dept of Consumer Affairs = Specific Commodity Prices (Onions/Pulses) via Price Stabilization Fund; (3) FSDC = Financial Stability (Systemic Risk), not Price Stability; (4) Central Govt = Sets the inflation target (4% ±2%) every 5 years.
  4. [THE STRATEGIC METACOGNITION]: Always categorize institutions by their 'Primary Mandate' vs. 'Secondary Functions'. While the Govt fights inflation via fiscal measures (tax/supply), the *responsibility* for maintaining price stability is legally assigned to the RBI.
Concept hooks from this question
📌 Adjacent topic to master
S1
👉 Monetary policy as tool for price stability
💡 The insight

Monetary policy is used to achieve price stability in India through the RBI's actions.

High-yield for UPSC GS Paper 3: explains how the central bank's policy stance affects inflation and growth. Helps answer questions on policy mandates, trade-offs between inflation and growth, and institutional roles.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.13 Monetary Policy > p. 60
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.13 Monetary Policy > p. 59
🔗 Anchor: "In India, is the Reserve Bank of India responsible for maintaining price stabili..."
📌 Adjacent topic to master
S1
👉 Inflation targeting framework (4% ±2%)
💡 The insight

India follows a notified inflation target of 4% with a ±2% band, set by the government in consultation with the RBI.

Important for interpreting RBI accountability and policy tools; useful for questions on macroeconomic targets, RBI governance, and the role of reports like the MPR/FSR in assessing inflation dynamics.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.13 Monetary Policy > p. 60
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > MONETARY POLICY REPORT AND FINANCIAL STABILITY REPORT > p. 173
🔗 Anchor: "In India, is the Reserve Bank of India responsible for maintaining price stabili..."
📌 Adjacent topic to master
S1
👉 Monetary instruments to manage money supply
💡 The insight

The RBI controls money supply through instruments such as bank rate, open market operations, and reserve ratio adjustments to influence inflation.

Crucial for answering how RBI implements policy to control inflation and liquidity; links to banking regulation, transmission mechanism, and fiscal-monetary interactions in exam questions.

📚 Reading List :
  • Macroeconomics (NCERT class XII 2025 ed.) > Chapter 3: Money and Banking > Central bank > p. 38
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.13 Monetary Policy > p. 59
🔗 Anchor: "In India, is the Reserve Bank of India responsible for maintaining price stabili..."
📌 Adjacent topic to master
S2
👉 RBI and monetary policy as the primary instrument for price stability
💡 The insight

The Reserve Bank of India operates monetary policy whose stated objective is to maintain price stability and set the inflation target.

High-yield for GS3 and economy questions: explains who formally controls inflation via interest rates and money supply, links to questions on inflation targeting, central bank functions, and macroeconomic management. Mastery enables answering policy-role and institutional-responsibility questions.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.13 Monetary Policy > p. 60
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.14 RBI and its Functions > p. 65
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.13 Monetary Policy > p. 59
🔗 Anchor: "In India, is the Department of Consumer Affairs responsible for maintaining pric..."
📌 Adjacent topic to master
S2
👉 Department of Consumer Affairs and commodity-level price stabilization (Price Stabilization Fund)
💡 The insight

The Department of Consumer Affairs administers a Price Stabilization Fund and undertakes market intervention to moderate price volatility in selected agri-horticultural commodities.

Important for questions on administrative interventions, food-price management, and nexus between ministries and markets; shows how sectoral buffer/market intervention complements macro policy. Useful for linking consumer protection, food policy, and short-term price control measures.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 12: Supply Chain and Food Processing Industry > 12.4.1Price Stabilization Fund (PSF) > p. 368
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > ENSURING RIGHTS OF CONSUMERS > p. 339
🔗 Anchor: "In India, is the Department of Consumer Affairs responsible for maintaining pric..."
📌 Adjacent topic to master
S2
👉 Three broad categories of anti-inflation measures: monetary, fiscal, administrative
💡 The insight

Inflation control measures are classified into monetary, fiscal and administrative approaches, indicating multiple institutional roles in price management.

Core conceptual tool for analyzing policy responses to inflation across GS3 and essay topics: helps structure answers on policy mix, compare RBI tools versus government administrative/fiscal actions, and evaluate effectiveness of interventions like PSF.

📚 Reading List :
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 4: Inflation > MEASURES TO CHECK INFLATION > p. 71
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 12: Supply Chain and Food Processing Industry > 12.4.1Price Stabilization Fund (PSF) > p. 368
🔗 Anchor: "In India, is the Department of Consumer Affairs responsible for maintaining pric..."
📌 Adjacent topic to master
S3
👉 Monetary policy and RBI's role in price stability
💡 The insight

Monetary policy is the primary tool used to maintain price stability and it is operated by the Reserve Bank of India.

High-yield for UPSC: questions often ask which institution implements monetary policy and who is responsible for controlling inflation via money supply and interest rate tools. Connects to macroeconomics, banking, and polity (institutional roles). Helps answer items on responsibility for inflation control and policy instruments.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.13 Monetary Policy > p. 60
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.13 Monetary Policy > p. 59
🔗 Anchor: "In India, is the Expenditure Management Commission responsible for maintaining p..."
🌑 The Hidden Trap

The Trap: Who *sets* the inflation target? It is NOT the RBI. The Central Government determines the inflation target in consultation with the RBI, once every five years. The RBI's job is to *achieve* it.

⚡ Elimination Cheat Code

Apply the 'Tool-Target' Logic. To control inflation (Target), you need to control Money Supply (Tool). Who holds the lever for Money Supply? Not a Department (A), not a Commission (B), not a Council (C). Only the Central Bank (D) can print or absorb currency.

🔗 Mains Connection

Mains GS-3 (Indian Economy): Connect this to 'Flexible Inflation Targeting' (FIT). Discuss the Urjit Patel Committee recommendations and the debate on whether focusing solely on Price Stability hurts GDP Growth (the 'Phillips Curve' trade-off).

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SIMILAR QUESTIONS

IAS · 2015 · Q87 Relevance score: 3.75

With reference to inflation in India, which of the following statements is correct?

IAS · 1994 · Q35 Relevance score: 3.14

Which one of the following governmental steps has proved relatively effective in controlling the double-digit rate of inflation in the Indian economy during recent years ?

CDS-I · 2017 · Q100 Relevance score: 2.37

Which one of the following indices is now used by the Reserve Bank of India to measure the rate of inflation in India?

IAS · 1997 · Q67 Relevance score: 0.95

In India, inflation is measured by the

CDS-I · 2023 · Q31 Relevance score: 0.82

Which one of the following is a measure that can be used by the Government for combatting inflation?