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GS3 Source: PIB

RBI Policy Outlook and Inflation Anchor

By Neha Verma · GS Mentor · 05 Apr 2026 · 890 views

Quick Brief — Read in 60 Seconds

RBI balances growth support with price stability mandate under RBI Act.

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Transmission

Credit channel and bond yields.

Previous Year Questions on This Topic

2023 GS3: What is monetary policy transmission?

Practice: Write Your Mains Answer

Examine RBI's role in managing inflation without choking investment. (250 words)

Submit your answer for expert review →

Prelims Questions (With Right Answer & Solution)

Q1. Repo rate changes primarily influence:

A. Fiscal deficit directly

B. Cost of short-term bank borrowing from RBI

C. Foreign exchange reserves only

D. Election dates

Right Answer: B

Solution: Repo is the policy rate banks pay for overnight liquidity from RBI.

Difficulty: easy · Marks: 2.00 · Negative: 0.67

Q2. Core CPI excludes which component?

A. Food and fuel

B. Services only

C. Housing only

D. Manufacturing only

Right Answer: A

Solution: Core inflation strips volatile food and energy to gauge underlying price pressure.

Difficulty: medium · Marks: 2.00 · Negative: 0.67

UPSC Vocabulary from This Article

Repo Rate

Rate at which RBI lends to banks overnight.

FAQs

What is MPC?

Monetary Policy Committee decides policy repo rate.

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