UPSC CSE Prelims
Question 2
Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?
View correct answer and explanation
Correct answer: D
Correct Option: D
Explanation:
Expansionary monetary policy lowers interest rates or adds liquidity and may weaken the rupee, whereas lower import demand, stronger export inflows and external financing tend to support it.
Option-wise Analysis:
A (Incorrect): Restricting non-essential imports and encouraging exports can reduce net foreign-currency demand.
B (Incorrect): Masala bonds can attract overseas financing in rupees, limiting exchange-rate exposure.
C (Incorrect): Easier overseas borrowing can bring foreign currency into India, though it carries debt risks.
D (Correct): The proposed expansionary stance is least likely to arrest depreciation because it can weaken currency demand.