Q129
Indian EconomyInflation
Which one of the following is not the anti-inflationary measure in India?
- a.Curbing disposable income of the people
- b.Checking black markets
- c.Tax reform
- d.Increase in money supply
Answer: (D) Increase in money supply
Inflation is controlled by reducing the amount of money chasing goods, so increasing the money supply (D) would feed inflation, not fight it. The real anti-inflationary tools are monetary (the RBI raises the repo rate, CRR and SLR and sells securities in open market operations), fiscal (lower government spending, higher or better-targeted taxes, which is how curbing disposable income and tax reform work) and administrative (action against hoarding and black marketing under the Essential Commodities Act, 1955, stock limits, imports and the public distribution system). Since 2016 the RBI's Monetary Policy Committee has followed flexible inflation targeting of 4% with a band of plus or minus 2%.