With reference to inflation in India, which of the following statements is correct?

1. A. Controlling the inflation in India is the responsibility of the Government of India only.
2. B. The Reserve Bank of India has no role in controlling the inflation.
3. C. Decreased money circulation helps in controlling the inflation.
4. D. Increased money circulation helps in controlling the inflation.

Answer: C

Explanation

RBI and government both play a role in controlling the inflation, often termed as “inflation targeting” by the RBI. Hence, a and b are incorrect. Increased money circulation leads to increased inflation as demand increases. RBI increases bank rates and SLR etc. to reduce money supply in the market which tames demand and hence, inflation.