Money supply refers to the total stock of money of all types ( currency as well as demand deposits) held by the people of a country at a given point of time.
In India, money supply is measured in several ways among which M1 is a type of measurement that measures the money as a medium of exchange function.
M1= C+ DD+ OD
where,
C: It refers to currency held by public in terms of coins and paper notes.
DD: It refers demand deposits of the people with the commercial bank.
OD: These includes other deposits with public financial institution, foreign central banks and international financial institution.
M1 measurement of money supply excludes time deposits with banks as it is the most liquid money supply and time deposits are not liquid assets. Therefore, time deposits are not included in M1 measurement of money supply.