Functions of Money — Predicted 2026

AI-Predicted Question Angles for UPSC 2026

Based on trend analysis, current affairs, and recurring themes in Functions of Money.

Impact of Central Bank Digital Currency (CBDC) on the traditional functions of money.

High

With the RBI actively piloting the Digital Rupee (e₹), UPSC is highly likely to test its implications. Questions could focus on how e₹ enhances the medium of exchange (efficiency, security), acts as a stable digital store of value, and its implications for the unit of account and standard of deferred payment. Aspirants should be prepared to compare e₹ with physical cash, UPI, and private cryptocurrencies, analyzing its potential to foster financial inclusion and its role in monetary policy transmission [VY:ECO-01-05-01].

The evolving nature of money's 'store of value' function in an era of persistent inflation and alternative assets (gold, real estate, cryptocurrencies).

Medium to High

Global and domestic inflationary pressures are a constant concern. This angle would test an aspirant's understanding of how inflation erodes money's purchasing power, pushing individuals towards other assets to preserve wealth. Questions could explore the challenges faced by the RBI in maintaining price stability to protect money's store of value, and the economic implications of a shift in investment patterns. The role of gold as a traditional hedge against inflation in India is particularly relevant here, linking to inflation concepts [VY:ECO-01-06-01].

How the 'medium of exchange' function is being transformed by FinTech innovations and the challenges of ensuring financial inclusion in a rapidly digitizing economy.

High

India's success with UPI and other FinTech innovations has made the medium of exchange incredibly efficient for many. However, the digital divide remains a challenge. Questions could explore the benefits (reduced transaction costs, speed) and drawbacks (cybersecurity, exclusion of digitally illiterate populations) of this transformation. This angle connects directly to the digital economy [VY:ECO-02-08-01], financial inclusion, and the role of the banking system in India [VY:ECO-01-04-00] in adapting to these changes.