2023 · Q51
Consider the following statements :
Statement IIn India, the Central Government determines the inflation target, in consultation with the Reserve Bank of India, in terms of the Consumer Price Index once in five years.
Statement IIAt present, the Monetary Policy framework in India is operated by the Central Government.
Which of the following is correct with respect of the above statements?
Indian EconomyBanking and RBI
- ABoth statements I and statement II are correct, and statement II is the correct explanation for statement I
- BBoth statements I and statement II are correct, and statement II is not the correct explanation for statement I
- CStatement I is correct but statement II is incorrect
- DStatement I is incorrect but statement II is correct
Explanation
Statement I is correct: under Section 45ZA of the RBI Act, 1936, the Central Government notifies the CPI-based inflation target (4% with a +/-2% band) every five years in consultation with the RBI. Statement II is incorrect: the monetary policy framework is operated by the RBI through its Monetary Policy Committee, not by the Central Government. Hence (c).