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Throw light on monetary aggregates followed by the Reserve Bank of India (RBI). What are the factors that affect money supply in India?

Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

3. Throw light on monetary aggregates followed by the Reserve Bank of India (RBI). What are the factors that affect money supply in India?  (250 words)

Difficulty level: Easy

Reference: Insights on India

Why the question:

The question is part of the static syllabus of General studies paper – 3 and mentioned as part of Mission-2023 Secure timetable.

Key Demand of the question:

To write about monetary aggregates factors that affect money supply in India.

Structure of the answer:

Introduction: 

Begin by giving a brief about the concept of monetary aggregates.

Body:

First, write in detail and explain the various monetary aggregates – M0, M1, M2, M3 and M4.

Next, write about the various factors that affect the money supply in the economy – Monetary Base, Money Multiplier, Policies of the government. Cite examples to substantiate.

Conclusion:

Conclude by summarising.