RBI's Monetary Policy: Repo, CRR, SLR, and What Actually Moves Inflation

In June 2022, the RBI held an emergency off-cycle Monetary Policy Committee meeting and raised the repo rate by 40 basis points. It was the first off-cycle rate action since 2020's COVID cut. The trigger: inflation at 7.8%, well above the upper tolerance band of 6%. Over the next 18 months, the MPC raised the repo rate 250 basis points - from 4% to 6.5%. Understanding why these decisions were made, what instruments were used, and how they affect you is the core of monetary policy for UPSC.

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[TOPIC CLASSIFICATION]

Topic type: Monetary Economics / RBI / Economy PYQ frequency: Very High. Every year in Prelims; Mains GS 3 standard topic. Exam stage relevance: Prelims + Mains Primary GS Paper: GS 3 (Indian Economy)

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[EXAMINER REASONING]

1. Trap: Confusing fiscal/monetary policy tools, budget terminology, or institutional mandates. Examiners test precise economic terminology.
2. Most confused: The distinction between revenue/capital expenditure, fiscal/monetary policy domains, plan/non-plan expenditure (legacy), GDP/GVA, WPI/CPI, FDI/FPI.
3. Key anchor: Constitutional provisions (Art 110, 112, 265, 266, 280, 293), institutional architecture (Finance Ministry, RBI, NITI Aayog, GST Council, Finance Commission, CBDT, CBIC, SEBI, IRDAI, PFRDA), and policy framework (FRBM Act, RBI Act, Banking Regulation Act, Companies...