Correct Option
Monetary policy refers to the actions undertaken by the Reserve Bank of India (RBI) to manage the money supply and credit conditions in the economy, primarily to achieve objectives such as price stability, full employment, and economic growth. Its key components include:
- Bank Rate: This is the rate at which the RBI lends money to commercial banks without any collateral. A change in the bank rate influences the lending rates of commercial banks, thereby affecting credit creation and money supply in the economy.
- Open Market Operations (OMO): These involve the buying and selling of government securities by the RBI in the open market. OMOs are used to regulate liquidity in the banking system. When the RBI sells securities, it withdraws liquidity, and when it buys securities, it injects liquidity.
Public debt and public revenue are components of fiscal policy, which is managed by the Government of India (Ministry of Finance). Fiscal policy deals with government spending and taxation to influence the economy. Therefore, they are not part of monetary policy.
Incorrect Options
- Option (a) is incorrect because while Bank Rate is a component of monetary policy, Open Market Operations (OMO) are also a crucial tool. Thus, stating "1 only" is incomplete.
- Option (b) is incorrect because Public debt and Public revenue are instruments of fiscal policy, not monetary policy.
- Option (d) is incorrect because it includes Public debt and Public revenue, which fall under fiscal policy, not monetary policy.