Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?
A
Curbing imports of non-essential goods and promoting exports
B
Encouraging Indian borrowers to issue rupee denominated Masala Bonds
C
Easing conditions relating to external commercial borrowing
D
Following an expansionary monetary policy
Correct Answer
Explanation
Option (D) is correct because an expansionary monetary policy involves lowering interest rates and increasing money supply, which triggers capital outflow and further depreciates the rupee rather than stabilizing it. Option (B) is a valid measure to stop the slide because Masala Bonds attract foreign capital while shifting exchange rate risk to the investor, thereby supporting the rupee's value. The core concept tested is the relationship between monetary policy, capital flows, and exchange rate management.
External SectorExchange Rate Management, Monetary PolicyIndian rupeeslideGovernmentRBIcurbing importspromoting exportsMasala Bondsexternal commercial borrowing (ECB)expansionary monetary policy