An open market operation is an instrument of Monetary Policy. Explanation & Key Takeaways: • Open Market Operations (OMOs) • This is conducted by RBI by way of sale/purchase of government securities to/from the market to adjust the rupee liquidity conditions in the market on a durable basis. • If there is excess liquidity, RBI resorts to the sale of securities and sucks out the rupee liquidity. • Similarly, when the liquidity conditions are tight, RBI buys securities from the market, thereby releasing liquidity into the market. • It is one of the quantitative (to regulate or control the total volume of money) monetary policy tools that are employed by the central bank of a country to control the money supply in the economy. Related Concepts: • Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. • Budgeting provides a systematic way of reviewing estimated actual results, coordinating future activities, and setting realistic targets. It is an effective management tool and its benefits include: Provides a time frame required to control finances. Highlights cashflow shortages/financing requirements etc. • LPG stands for Liberalization, Privatization, and Globalization. India under its New Economic Policy approached International Banks for the development of the country. These agencies asked the Indian Government to open its restrictions on trade done by the private sector and between India and other countries.