The Working Group under the chairmanship of __________ in the year_________ proposed a new intermediate monetary aggregate to be referred to as NM2.

Correct — D. The Working Group on Money Supply: Analytics and Methodology of Compilation, chaired by Dr YV Reddy and reporting in 1998, proposed the new monetary aggregates NM0, NM1, NM2 and NM3.

The prefix N stands for new. The group rebuilt the measures on a residency basis and on the maturity of deposits, so that each aggregate said something about liquidity rather than only about who issued the money.

Alongside them it proposed the liquidity aggregates L1, L2 and L3. Option (d) is the pairing that puts the right chairman with the right year.

Why the others are wrong

• (a)
  Dr. C Rangarajan; 1996 — Dr C Rangarajan was RBI Governor from 1992 to 1997 and is attached to the reform committees of that decade, but the NM aggregates came out of the 1998 Working Group, not a 1996 exercise.
• (b)
  Dr. KV Kamath; 1995 — Dr KV Kamath built his career in commercial banking rather than in RBI's monetary policy work, and the year offered with his name is wrong as well.
• (c)
  Dr. PK Mohanty; 1998 — The year here is right and the name is not. The 1998 Working Group that proposed NM2 was chaired by Dr YV Reddy, not Dr PK Mohanty.

Money supply in India is reported in layers. The older series ran M1 to M4, from the narrowest measure to the broadest.

The 1998 Working Group proposed a parallel NM series — NM0, NM1, NM2, NM3 — built on residency and on how quickly a deposit can be turned into spending.

NM1 is the narrowest, covering currency with the public and demand deposits. NM2 adds short-term time deposits of residents, and NM3 adds the longer-term ones.

RBI continues to publish the familiar M1 and M3 as well, which is why both vocabularies survive in textbooks and in exam papers.

Key facts

• The 1998 Working Group on Money Supply, chaired by Dr YV Reddy, proposed the aggregates NM0, NM1, NM2 and NM3.
• The same group proposed the liquidity aggregates L1, L2 and L3.
• NM2 is NM1 plus short-term time deposits of residents.
• YV Reddy was Governor of the Reserve Bank of India from 2003 to 2008.

Common traps

• Option (c) carries the right year, 1998, with the wrong chairman, so the year alone cannot settle it.
• M2 and NM2 are different measures from different vintages of the same statistics.
• Rangarajan chaired several reform committees, which makes his name feel right on any RBI question.

No directly related past PYQ was found.