Question 11
1. It decides the RBI's benchmark interest rates.
2. It is a 12-member body including the Governor of RBI and is reconstituted every year.
3. It functions under the chairmanship of the Union Finance Minister.
Select the correct answer using the code given below:
AOptions
BSolution
Statement 1 is correct: The Monetary Policy Committee (MPC) is entrusted with the responsibility of determining the policy interest rates (like the repo rate) necessary to achieve the inflation target set by the government. This is its core function.
Statement 2 is incorrect: The MPC is a six-member body. It comprises three members from the Reserve Bank of India (including the Governor, who is the ex-officio Chairperson; the Deputy Governor in charge of monetary policy; and one officer of the Bank nominated by the Central Board) and three members appointed by the Central Government. It is not a 12-member body, and the government-appointed members hold office for four years and are not eligible for re-appointment, so it is not reconstituted every year in its entirety.
Statement 3 is incorrect: The MPC functions under the chairmanship of the Governor of the Reserve Bank of India, not the Union Finance Minister. The Union Finance Minister is part of the broader government framework but does not chair the MPC.
Therefore, only statement 1 is correct.
CStrategy
For questions on important economic bodies like the Monetary Policy Committee, it is crucial to know their composition (number of members, who they are), who chairs them, and their primary functions. Pay close attention to numerical details and official roles.
DSyllabus Analysis
Indian Economy - Monetary Policy, Reserve Bank of India and its functions.
EQuestion Analysis
Medium. Requires precise factual knowledge about the Monetary Policy Committee.