Question

Consider the following statements about the monetary policy system in India.

a) The government of India wanted a fresh outlook at the Indian monetary system and hence appointed a Committee under the chairmanship of S.Chakravarty.

b) The committee submitted its report in May 1986.

Which of the above statements are correct?

1. a only
2. b only
3. Both a and b 
4. Neither a nor b

Answer 1

Correct Answer - Option 4 : Neither a nor b

The correct answer is Neither a nor b.

• In December 1982, Dr. Manmohan Singh, the then Governor of the RBI, appointed a Committee under the Chairmanship of Sukhamoy Chakravarty to review the functioning of the monetary system in India. (Note: it's the RBI who appointed and not Govt of India). Hence statement a is not correct.
• The Committee was assigned major terms of reference as follows :
  • To critically review the structure and operation of the monetary system in the context of the basic objectives of planned development.
  • To assess the interaction between monetary policy and public debt management in so far as they have a bearing on the effectiveness of the monetary policy.
  • To evaluate the various instruments of monetary and credit policy in terms of their impact on the credit system and on the economy. In this context, links among the banking sector, the non-banking financial institutions, and the unorganised sector could be assessed.
  • To recommend measures for improvement in the formulation and operation of monetary and credit policies and to suggest specific areas where the various policy instruments need strengthening.
  • To make such other recommendations as the Committee may deem relevant to the effective operation of monetary and credit policy.
• The Committee submitted its report in 1985. Hence statement b is not correct.