SSC CGL 2024 Tier-I · 23 September 2024, Shift 1 · General Awareness · Question 14 of 97

Text as printed on a candidate's response sheet for this shift; answer per SSC's tentative key as marked on that sheet. Solution last reviewed 6 September 2026.

Where this paper and its answers come from

SSC does not publish CGL question papers or a public answer key. The questions and options here are reproduced as printed on a candidate's own response sheet for this shift — the Commission's text, unchanged. Each answer is SSC's tentative key as marked on that sheet; SSC allowed challenges to it and never publishes a final key. The solutions are written by UnlockIAS.

The Flexible Inflation Targeting Framework (FITF) was introduced in India post the amendment of the Reserve Bank of India (RBI) Act, 1934 in __________.

(a)2010
(b)2014
(c)2016
(d)2020

Answer

Why

Correct — C. The RBI Act, 1934 was amended through the Finance Act, 2016, which gave statutory backing to a flexible inflation targeting framework and to a rate-setting Monetary Policy Committee.

The Centre then notified the target — 4% CPI inflation with a ±2% tolerance band — in August 2016, and the MPC was constituted the same year. 2016 is the year the framework acquired legal force.

Why the others are wrong

(a)
2010 — In 2010 the RBI still ran a multiple-indicator approach, weighing credit, trade and output alongside prices, with no notified inflation target and no statutory committee.
(b)
2014 — 2014 is the year the Urjit Patel Committee recommended a CPI-anchored framework. A recommendation is not an amendment, and the RBI Act was untouched that year.
(d)
2020 — By 2020 the framework was already four years old and the MPC was setting the repo rate. No inflation-targeting amendment was made in 2020 — the target itself was next revisited in 2021.

Concept

Inflation targeting makes price stability the primary, legally stated goal of the central bank, with a numeric target notified by the government.

India's version is called flexible because the amended Act sets price stability as the objective while keeping in mind the objective of growth — output is not ignored, it is subordinate.

Failure is defined in the Act itself: if average CPI inflation stays outside the band for three consecutive quarters, the RBI must report to the Centre on why, and on what it will do.

The question dates the framework to the amendment, not to the Monetary Policy Framework Agreement the Centre and the RBI signed in 2015. That agreement was administrative; the 2016 amendment made the arrangement statutory.

Key facts

The RBI Act, 1934 was amended in 2016 to give statutory backing to flexible inflation targeting and to the Monetary Policy Committee.
The notified target is 4% CPI inflation with a tolerance band of ±2%.
The MPC has six members — three from the RBI including the Governor, and three appointed by the Central Government — and the Governor has a casting vote.
Inflation outside the band for three consecutive quarters counts as a failure, on which the RBI must report to the Central Government.

Study next

Composition and voting rules of the Monetary Policy CommitteeThe 2015 Monetary Policy Framework Agreement and what it lackedRepo rate and the standing deposit facility as instruments of the MPC

Common traps

Reading 2015, the year of the framework agreement, as the year the law changed
Confusing 1934, the year of the RBI Act itself, with the year of its inflation-targeting amendment

Monetary-policy items here turn on one dated fact — the year, the committee, or the body that recommended it.

The RBI's own founding and the commission behind it are asked at 13 Sep 2024, 09:00, General Awareness Q.16, keyed to the Hilton Young Commission.

Related PYQs

No directly related past PYQ was found.