Who among the following is entrusted with the responsibility of conducting monetary policy in India?

Appeared in: NVS Staff Nurse - 2019

Explanation

The Reserve Bank of India (RBI) is India's central banking institution, which controls the monetary policy of the Indian rupee.
The primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth.
The RBI uses various tools to implement its monetary policy, including the repo rate, reverse repo rate, Cash Reserve Ratio (CRR), and Statutory Liquidity Ratio (SLR).
By adjusting these rates and ratios, the RBI influences the amount of money available in the economy, thereby controlling inflation and interest rates.

Option A: The State Bank of India (SBI) is a public sector commercial bank. It is a player in the banking system and must adhere to the monetary policy set by the RBI, but it does not create the policy.
Option B: The Central Government, through the Ministry of Finance, is responsible for fiscal policy, which deals with taxation, government spending, and borrowing. This is distinct from monetary policy.
Option C: The Finance Commission is a constitutional body that recommends the distribution of financial resources (tax revenues) between the Union and the States. Its role is in fiscal federalism, not monetary management.

Clinical Relevance

Nursing practice connection: This is primarily an exam-oriented knowledge point with limited direct bedside application, so retain Responsibility for Monetary Policy in India as background academic context rather than a clinical decision trigger.
This is a general knowledge question. The economic relevance for a common person is that RBI's monetary policy directly impacts their life.
RBI's decisions on interest rates affect the Equated Monthly Installments (EMIs) for home loans, car loans, and personal loans.
By controlling inflation, the RBI influences the purchasing power of money, affecting the cost of everyday goods and services.

How to Approach the Question

First, identify the key term in the question: 'monetary policy'.
Understand that 'monetary policy' relates to the management of money supply and credit in an economy.
Recall the primary economic institutions in India and their functions.
Differentiate between 'monetary policy' and 'fiscal policy'. Monetary policy is handled by the central bank, while fiscal policy is handled by the government.
Identify the Reserve Bank of India (RBI) as India's central bank.
Conclude that the RBI is responsible for monetary policy, and eliminate the other options by identifying their distinct roles (Central Government for fiscal policy, SBI as a commercial bank, and Finance Commission for tax sharing).

Concept Tested & Keywords

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Practise the full NVS Staff Nurse - 2019

Attempt every question from this paper in a timed mock, then review the full solution for each one.