With reference to the Indian economy, consider the following statements: 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy government securities. 2. If the rupee is rapidly depreciating, RBI is likely to sell dollars in the market. 3. If interest rates in the USA or European Union were to fall, that is likely to induce RBI to buy dollars. Which of the statements given above are correct?

Option (b) is correct because statement 2 accurately describes the RBI’s intervention to stabilize a depreciating rupee by selling dollars to increase their supply, while statement 3 reflects how the RBI manages capital inflows (triggered by lower foreign interest rates) by buying dollars to prevent excessive rupee appreciation. Statement 1 is incorrect because during high inflation, the RBI follows a contractionary policy and would *sell* government securities to mop up excess liquidity, rather than buying them. This question tests the core concepts of monetary policy tools (Open Market Operations) and foreign exchange management.