07 Jun 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.