Answer-The Monetary Policy Committee (MPC) of the Reserve Bank of India operates under a flexible inflation...

Under the amended RBI Act, the Government of India and the Reserve Bank of India jointly determined the inflation target at 4 Consumer Price Index CPI inflation, with a tolerance band of 2, making the upper limit 6 and the lower limit 2. The target is reviewed every five years. The MPC is mandated to bring and sustain CPI inflation within this band. If inflation breaches the tolerance band for three consecutive quarters, the MPC must submit a report to the Government explaining the reasons and the corrective measures proposed. The framework uses CPI not WPI as the benchmark measure.

Question

The Monetary Policy Committee (MP

C of the Reserve Bank of India operates under a flexible inflation targeting framework. Which of the following best describes the current inflation target mandate?

A CPI inflation of 4%, with an upper tolerance band of 5% and lower tolerance band of 3%

B WPI inflation of 4%, with a band of ±2%

C CPI inflation of 4%, with an upper tolerance band of 6% and lower tolerance band of 2%

D CPI inflation of 5%, with an upper tolerance band of 7% and lower tolerance band of 3%

E CPI inflation of 4%, with a band of ±1%

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