Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?
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Answer: D. An expansionary monetary policy (lower interest rates, more money supply) tends to push capital out and weaken the rupee further. The other three are steps actually taken in 2018 to support the rupee.
Watch for: Students read 'expansionary' as good for the economy and miss that it weakens the currency.
Why the other options are wrong
- A. Wrong because curbing non-essential imports and boosting exports supports the rupee.
- B. Wrong because rupee-denominated Masala Bonds bring in foreign money without dollar risk for borrowers, which helps the rupee.
- C. Wrong because easier external borrowing brings in dollars and supports the rupee.
Source to check: RBI and Ministry of Finance press releases of September 2018 on measures to contain the current account deficit; NCERT Class 12 Macroeconomics, chapter 'Open Economy Macroeconomics'
Answer from the official UPSC key. Written and fact-checked by AI against the official key. Spotted a mistake? Report it.