What are The Objectives and Tools of Monetary Policy in India?

Objectives of Monetary Policy in India

Tools of Monetary Policy in India

FAQs About the Objectives of Monetary Policy

What are the types of monetary policy in India? up-arrow

The two types of monetary policy in India are Expansionary Monetary Policy and Contractionary Monetary Policy. Expansionary monetary policy focuses on increasing the supply of money in an economy. However, the contractionary monetary policy helps reduce money supply in the economy.

How does monetary policy control inflation? up-arrow

Contractionary monetary policy helps in controlling inflation in an economy. Its objective is to reduce money supply in an economy by reducing the prices of bonds and raising interest rates. Thereby, consumption falls, leading to a drop in the price, thus slowing down inflation.

What is the most frequently used tool of monetary policy? up-arrow

Open Market Operations (OMO) is the most frequently used monetary policy. It includes sales and purchases of government securities for immersion and injection of firm liquidity.