Measures of Money Supply in India

The cash in your wallet and the balance sitting in a fixed deposit are both, in everyday speech, "your money" — but they are not equally useful for buying a cup of chai right now. Economists needed a way to measure exactly how much of a country's money is instantly usable versus locked up for later, and that is what the different measures of money supply are built to do.

In two minutes

Money supply is the total stock of money in circulation in an economy at a given time, measured by the Reserve Bank of India through four progressively broader concepts — M1, M2, M3 and M4 — moving from the most liquid forms of money to the least.

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