Correct option is A
The correct answer is (A) To maintain price stability
Explanation:
• The primary and legally mandated objective of monetary policy in India (conducted by the Reserve Bank of India) is to maintain price stability while keeping in mind the objective of economic growth.
• Price stability means keeping inflation in check, which creates a predictable economic environment conducive to sustained long-term growth.
Information Booster:
• Inflation Targeting: Under the flexible inflation-targeting framework adopted by India, the RBI's Monetary Policy Committee (MPC) targets an inflation rate of 4%, with a tolerance band of +/- 2% (i.e., between 2% and 6%).
• Tools Used: The central bank uses instruments like the Repo Rate, Reverse Repo Rate, Cash Reserve Ratio (CRR), and Open Market Operations to control the money supply.
Additional Knowledge:
• Maximize Employment (Option B): While promoting employment and growth is a secondary goal of central banks, the statutory primary anchor is price stability.
• Tax Evasion / Election Funding (Options C, D): These are illegal activities and have absolutely no relation to official macroeconomic policies.
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