briefly discuss various methods of

measurement occupied by RBI or money

supply in India ( only measurement of money
supply after chakravorty committe 1985 )
The Reserve Bank of India (RBI) uses various methods to measure money supply
in India, with the most widely recognized measure being M1, M2, and M3. These
measures were established after the Chakravarty Committee's recommendations in
1985, which aimed to provide a more accurate representation of the money supply
in the Indian economy. Here's a brief overview of these methods:

M1: M1 includes currency held by the public, demand deposits with commercial
banks, and other deposits with the RBI. It represents the most liquid components of
the money supply and is often referred to as narrow money. M1 is used to assess
the immediate liquidity available to the public.

M2: M2 includes M1 along with savings deposits with banks, post office savings
deposits, time deposits with a maturity of up to two years, and demand liabilities of
financial institutions. M2 is a broader measure of money supply and includes assets
that are less liquid than those in M1 but can still be quickly converted into cash or
used for payments.

M3: M3 is the broadest measure of money supply and includes M2 along with time
deposits with a maturity of over two years and net foreign exchange assets held by
the RBI. M3 provides an even more comprehensive view of the money supply and
is used for assessing the overall availability of money in the economy.

These measures are regularly monitored by the RBI to gauge the liquidity and
monetary conditions in the Indian economy. The choice of which measure to use
depends on the specific analytical requirements and policy objectives. The RBI
may also use other indicators, such as reserve money, to fine-tune its monetary
policy and achieve its goals, including controlling inflation and promoting
economic growth.