With reference to inflation in India, which of the following statements is correct?

Option A is incorrect: Controlling inflation is a joint responsibility of both the Government of India and the Reserve Bank of India (RBI). While the government manages fiscal policy and supply-side measures (like buffer stocks), the RBI manages monetary policy.

Option B is incorrect: The RBI plays a central role in controlling inflation. Under the RBI Act, 1934, the RBI has a specific mandate to maintain price stability. The Monetary Policy Committee (MPC) of the RBI adjusts policy rates (like the Repo rate) specifically to keep inflation within a target range (4% +/- 2%).

Option C is correct: Decreased money circulation (contractionary monetary policy) is a standard tool to control inflation. By reducing the liquidity available in the economy, the central bank can reduce aggregate demand, which helps in cooling down rising prices.

Option D is incorrect: Increased money circulation generally leads to an increase in aggregate demand. If the supply of goods and services does not keep pace with this increased demand, it leads to demand-pull inflation.