What is the primary tool used by the RBI to control inflation?

What is the primary tool used by the RBI to control inflation?

Step 1: Understand what inflation is. Inflation means that prices of goods and services are rising.
Step 2: Know that the Reserve Bank of India (RBI) is responsible for managing the economy, including controlling inflation.
Step 3: Learn about the repo rate. The repo rate is the interest rate at which the RBI lends money to commercial banks.
Step 4: Realize that when the RBI increases the repo rate, it becomes more expensive for banks to borrow money.
Step 5: Understand that when borrowing is more expensive, banks lend less money to people and businesses.
Step 6: Recognize that less money in circulation can help reduce spending, which can lower inflation.
Step 7: Conclude that modifying the repo rate is the primary tool the RBI uses to control inflation.

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