Rituals›Prelims GS I›Indian Economy›RBI — functions, instruments, monetary policy framework

Inflation targeting; MPC; FRBM

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Exam Strategy

This topic appears frequently in Prelims as direct factual questions on RBI's inflation target, MPC composition, and FRBM provisions. Examiners test precise knowledge of the 4% inflation target, MPC decision-making framework, and fiscal deficit caps under FRBM. Common errors: confusing inflation target with tolerance band, misremembering MPC member composition, or conflating FRBM with monetary policy.

High-yield hooks
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4% ± 2% inflation target band

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MPC: 6 members, 3 from RBI, 3 external

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FRBM: 3.5% fiscal deficit by 2025-26

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Monetary Policy Committee quarterly reviews

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Repo rate is MPC's primary instrument

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SCANECONOMY/MONETARY-POLICYECONOMY/FISCAL-POLICYPOLITY/RBI-GOVERNANCE