Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?
- Curbing imports of non-essential goods and promoting exports
- Encouraging Indian borrowers to issue rupee-denominated Masala Bonds
- Easing conditions relating to external commercial borrowing
- Following an expansionary monetary policy
Explanation
Option (d) is correct
- Expansionary monetary policy involves increasing the money supply and reducing interest rates to stimulate economic growth. While this can boost domestic demand, it generally leads to higher inflation and depreciation of the currency rather than stopping its slide.
Option (a) is incorrect
- Curbing imports of non-essential goods and promoting exports helps reduce the demand for foreign currencies (since imports require foreign exchange) and boosts foreign currency inflows (via exports), strengthening the rupee.
Option (b) is incorrect
- Encouraging rupee-denominated Masala Bonds attracts foreign investment without exposing Indian companies to currency risk, as these bonds are paid back in rupees. This increases foreign inflows and stabilizes the rupee.
Option (c) is incorrect
- Easing external commercial borrowing (ECB) conditions encourages Indian companies to raise capital from abroad, increasing foreign currency inflows, which helps reduce pressure on the rupee.
