UPSC Previous Year Question | Prelims GS | 2019

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

  1. Curbing imports of non-essential goods and promoting exports
  2. Encouraging Indian borrowers to issue rupee denominated Masala Bonds
  3. Easing conditions relating to external commercial borrowing
  4. Following an expansionary monetary policy

Answer

Correct Answer

Following an expansionary monetary policy

Explanation

Curbing non-essential imports, boosting exports, promoting masala bonds and easing ECB norms all increase foreign currency supply or reduce its demand. An expansionary monetary policy increases liquidity and inflation and would put further pressure on the rupee.

Topics: exchange rate management, external sector and monetary policy, indian economy, measures to arrest rupee depreciation