Question

The primary purpose of the RBI monetary policy is to maintain:
1. wealth
2. exchange rate
3. growth
4. price stability

Answer 1

Correct Answer - Option 4 : price stability

The correct answer is price stability.

• The primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth. 
  • Price stability is a necessary precondition to sustainable growth.
• RBI Act, 1934 was amended in May 2016  to provide a statutory basis for the implementation of the flexible inflation-targeting framework.
• Inflation-Targeting means to control price or to maintain price stability.
•  Inflation target to be set by the Government of India, in consultation with the RBI, once in every five years.
• The inflation target of monetary policy is 4% Consumer Price Index with an upper tolerance limit 6% and lower tolerance limit of 2%.