Which of the following are included in M1 definition of money for the Indian economy?

1. Reserves
2. Currency
3. Time deposits
4. Demand deposits

Select the correct answer using the code given below:

In the Indian economy, the M1 (Narrow Money) definition of money supply includes the most liquid assets. The components are:

• Currency with the public: Notes and coins held by the people (Item 2).
• Demand deposits: Balances in bank accounts (current and savings) that can be withdrawn on demand (Item 4).
• 'Other' deposits with the RBI: Deposits held by quasi-government institutions, foreign central banks, etc.

Why other items are excluded:

• Reserves (Item 1): Bank reserves held with the RBI are part of M0 (Reserve Money), not M1.
• Time deposits (Item 3): Fixed deposits with a maturity period are part of M3 (Broad Money), as they are not as liquid as cash or demand deposits.

Therefore, only items 2 and 4 are correct.