Indian Economy : 4 : M1/2/3/4

M1,M2,M3,M4 : Money Stock Measure Meaning

What is all this M1,M2,M3,M4?

• It shows the money supply in the market.
• More money = more liquidity = easy to get loans = inflation
• Less money = less liquidity = hard to get loans = problem
• As we saw earlier, RBI controls the money supply by changing its CRR, Repo etc rates. (thus controls inflation) that’s called ‘Monetary Policy’
• But for that, RBI needs to measure how much money is there in the market (=liquidity) ? they know it via these M1-M4.
• Side note– Govt. controls economy via changing Tax rates- that’s called ‘Fiscal Policy’

Thank you Satishtj for following information

M1= Currency with public + Current deposits with banking system + demand liabilites portion of saving deposits with the banking system .
Governor of RBI + ministers + MP can have account with RBI

Now see this chart

PS: sorry for the watermark, although my current id is not mrunalpatel.co.nr but mrunal.org.

Who calculates M1-M4?

RBI since 1970-71

What are the other names of this?

1.    Money Stock measure
2.    Measures of monetary Aggregates

Was there any reform in it?

Yes there was YB Reddy Group 1997-98 – and on their recommendations- following steps were taken.
Financial Sector Survey every 3 Months
4 New measures :M0-M3
3 Types Liquidity

What is all Hot money, soft money, hard currency etc?

That’s ‘Types of Currencies’ -See this chart

What is Dear Money and Cheap Money?

See this chart