Which one of the following is not the most likely measure the Governme

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

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC IAS – 2019

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The correct answer is D) Following an expansionary monetary policy.

An expansionary monetary policy typically involves lowering interest rates and increasing liquidity in the economy. This can lead to increased domestic demand and inflation, potentially making the country’s exports less competitive and increasing import demand. Furthermore, lower interest rates might make domestic assets less attractive to foreign investors, potentially leading to capital outflows. All these factors tend to weaken a currency (cause it to slide), not stop its slide.

Options A, B, and C are measures that can help strengthen the Indian Rupee:
A) Curbing imports (reduces demand for foreign currency) and promoting exports (increases supply of foreign currency) improves the trade balance and supports the rupee.
B) Encouraging Indian borrowers to issue rupee-denominated Masala Bonds abroad brings foreign currency into India as foreign investors buy these bonds, increasing demand for the rupee.
C) Easing conditions for External Commercial Borrowing (ECB) encourages Indian entities to borrow in foreign currency from abroad, bringing foreign currency into India and increasing its supply relative to the rupee.
Therefore, an expansionary monetary policy is the least likely measure to be taken to stop a currency slide.

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