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

1. Inflation refers to a sustained increase in the general price level of goods and services in an economy over a period of time. 2. Option (A) is incorrect. While the Government of India plays a role through fiscal policy and supply-side measures, controlling inflation is a shared responsibility, with the Reserve Bank of India (RBI) playing a crucial role through monetary policy. 3. Option (B) is incorrect. The RBI has the primary role in managing inflation through its monetary policy tools (like repo rate, CRR, SLR, open market operations) aimed at managing liquidity and interest rates. 4. Option (C) is correct. Inflation often occurs when there is too much money chasing too few goods ('demand-pull inflation'). Therefore, decreasing the money circulation (reducing liquidity) through contractionary monetary policy by the RBI tends to curb demand and helps in controlling inflation. 5. Option (D) is incorrect. Increased money circulation generally fuels demand and can exacerbate inflation, rather than controlling it.