2017 GS Paper I, all questions

UPSC Prelims 2017 · GS Paper I

Question 11: Economy and Social Development

Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC) ?

  1. 1.It decides the RBI’s benchmark interest rates.
  2. 2.It is a 12-member body including the Governor of RBI and is reconstituted every year.
  3. 3.It functions under the chairmanship of the Union Finance Minister.

Select the correct answer using the code given below :

a1 only
b1 and 2 only
c3 only
d2 and 3 only

AnswerUPSC’s answer is (a).

The Monetary Policy Committee, created in 2016 under the RBI Act, fixes the policy (benchmark) interest rate needed to meet the inflation target, so Statement 1 is right. It has six members, not twelve: three from the RBI, including the Governor who chairs it, and three outside experts named by the Government for four years, so it is not reconstituted every year. The Union Finance Minister does not chair it. Remember: six members, RBI Governor in the chair, decides the repo rate.

  • 1. The MPC decides the policy interest rate.
  • 2. It has six members, with external members serving four years.
  • 3. The RBI Governor chairs it.

How you could have got this

  1. If you were sure statement 1 is correct, (c) and (d) go: each of them leaves 1 out.

    What you needed to know: The MPC decides the policy interest rate.

  2. Then, if you were sure statement 2 is not correct, (b) goes: it includes 2.

    What you needed to know: It has six members, with external members serving four years.

Only (a) is left. You didn’t need statement 3.

Which options go is worked out from UPSC’s key and the options, not by a model.

Why each option is right or wrong
  • (a) Right: only Statement 1 is correct; the MPC sets the policy rate.
  • (b) Wrong: the MPC has six members, not twelve, and is not reconstituted yearly.
  • (c) Wrong: the RBI Governor, not the Finance Minister, chairs the MPC.
  • (d) Wrong: both statements 2 and 3 are false.

Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2017, General Studies Paper I, Series A. The paper on upsc.gov.in.