Diminishing options (The Hindu, GS-3, Economy)

 

Context:- Increase in the inflation in this COVID-19 times is influencing the monetary policy. RBI has taken the monetary policy on standstill i.e. neither increase or decrease in the repo rate.

What is monetary policy:-

  •  It is a tool pursued by the RBI in a quantitative way to increase the decrease the repo rate.
  • Monetary policy committee decides the matter which consists of 3 person from RBI and 3 from government
  • The RBI governor is the ex-officio chairman of the committee.
  • The RBI governor has the casting vote.

What to do in case of inflation:-

  • Decrease the money supply to contain the inflation.
  • But COVID-19 restrictions led to decrease in the production so too much money is chasing the few goods. 
  • But post-restrictions increase in the production will ultimately led to decrease in the inflation.

    Download Daily Current Affairs of 07 Jun 2021