Which one of the following is not the most likely measure the Government/ RBI takes to stop the slide of Indian rupee?

1. A

   Curbing imports of non- essential goods-and promoting exports

   (a) Curbing non-essential imports and promoting exports supports the rupee by improving the current account. It is a likely measure, so it is not the “not likely” key.

2. B

   Encouraging Indian borrowers to issue rupee denominated Masala Bonds

   (b) Masala bonds raise rupee funds from abroad without adding dollar debt; they can ease external pressure. A likely measure, not the key.

3. C

   Easing conditions relating to external commercial borrowing

   (c) Easier ECB can bring dollar inflows in the short run and support the rupee. A likely measure, not the key.

4. D

   Following an expansionary monetary policy

   (d) Expansionary monetary policy cuts rates and can push capital out, raising import demand — which worsens a rupee slide. It is therefore not the measure used to stop the slide. Official key.

Summary. Official key is (d). To defend the rupee, policy tightens liquidity, attracts inflows, or compresses the current-account gap. Expansionary money does the opposite. Import curbs, Masala bonds and easier ECB are the sorts of tools that can support the currency. Honour (d).