What is the purpose of capacitors in power factor correction?

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Capacitors in power factor correction provide reactive power that leads the voltage. Inductive loads (like motors and transformers) draw reactive power that makes the current lag, reducing the power factor. By adding capacitive reactance, the capacitor supplies leading reactive power that partially cancels the inductive reactive power, which lowers the overall reactive component and brings the current more in phase with the voltage. The result is a higher power factor, meaning the system uses real power more efficiently and the line current for the same real power is reduced.

This is why the best description is that capacitors improve power factor by supplying reactive power. The other options miss the main function: capacitors don’t increase inductive reactance; they don’t specifically serve motor starting in the context of PF correction (start capacitors exist, but that’s a different use); and while reducing current can be a consequence, the explicit purpose is supplying reactive power to improve PF.