The next objective of the Central Bank is to ensure that the economy grows at a smooth pace.
One of the ways to measure economic growth is to measure GDP growth.
GDP stands for Gross Domestic Product and is the total monetary value of all final goods & services produced in an economy at a given time period.
A rise in GDP signifies a rise in total output. It is presumed that this output is sold in the market and exchanged for money. Hence, with a rise in total output, the corresponding income of households is likely to increase.
A more accurate measure to use is the Per Capita GDP i.e. (Total Market value of Goods & Services) / (Total population)
The Reserve Bank of India aims to influence economic activity by using its monetary policy tools discussed previously. It ensures the flow of credit to the most productive sectors of the economy and therefore keeping the engine well oiled.