The correct answer is option 3, M3. M3 is considered the most widely used form of money supply in the Indian monetary system.

To understand this, let`s first define what M1, M2, M3, and M4 represent:

- M1 includes all physical currency in circulation (coins and paper notes) along with the demand deposits held in banks. It is the narrowest definition of money supply.

- M2 includes M1 along with savings deposits, time deposits, and money market mutual funds.

- M3 includes M2 along with net time deposits held by non-bank financial institutions and the public.

- M4 includes M3 along with all deposits with post office savings organizations.

Out of these definitions, M3 is considered the most comprehensive measure of money supply as it includes a wider range of deposits held by both banks and non-bank financial institutions. It provides a broader understanding of the total money supply in the economy. Therefore, option 3 is the correct answer.

Alert - correct answer should be option 2, M2. In the Indian monetary system, M2 is considered the most widely used form of money supply. M2 includes M1 (physical currency in circulation and demand deposits), savings deposits, time deposits,