UPSC | Prelims GS | 2026

With reference to monetary policy in India, consider the following statements: 1. The Monetary Policy Committee is associated with decisions on the policy repo rate. 2. A change from a neutral stance to calibrated tightening signals a greater concern about inflationary pressures. 3. A repo-rate increase is a direct fiscal measure undertaken by the Union Budget. Which of the statements given above is/are correct?

  1. 1 and 2 only
  2. 2 and 3 only
  3. 1 and 3 only
  4. 1, 2 and 3

Answer

Correct Answer

1 and 2 only

Explanation

Statements 1 and 2 are correct: the MPC determines the policy repo rate and a tightening stance communicates stronger anti-inflation intent. Statement 3 is incorrect because the repo rate is a monetary-policy instrument of the RBI framework, not a fiscal measure in the Union Budget. Fiscal measures concern taxation, expenditure and borrowing.

Topics: economy, inflation targeting, monetary policy, monetary policy committee