Which reference to inflation in India, which of the following statements is correct?

Our answer is C. Inflation is a monetary phenomenon when too much money chases too few goods, so reducing money circulation (through tighter liquidity, higher policy rates and reduced credit growth) pulls demand down and helps control inflation.

• A is wrong: Inflation control is shared. Under the Monetary Policy Framework Agreement of February 2015, the RBI and the Government of India jointly own the target, and the RBI Act was amended in 2016 to create a Monetary Policy Committee.
• B is wrong: The RBI is the primary institution for inflation control, using repo rate, CRR and SLR. Since 2016 it works under a flexible inflation targeting framework with a 4 per cent target and a 2 per cent band.
• D is wrong: More money in circulation adds to demand and pushes prices up, which is the opposite of controlling inflation.

The core concept is demand-side inflation and monetary policy transmission. For Mains, link this to the debate on whether supply-side food inflation can be tackled by monetary tools alone, and to the RBI-Government coordination in GS-III economy papers.

Trap: Candidates pick A or B because they assume inflation is purely a fiscal or a central government matter. The question tests the shared, but RBI-led, monetary framework.