UPSC Prelims 2022 · GS Paper 1 · Q93

Economy

Medium · RBI's monetary and forex operations

Consider the following statements about the likely actions of the Reserve Bank of India:

1. During a period of persistently high inflation, RBI is likely to buy government securities from the market to inject liquidity.

2. If the rupee is depreciating rapidly, RBI is likely to sell dollars from its foreign exchange reserves to stabilise the currency.

3. If interest rates in the USA and the Eurozone fall sharply, triggering large capital inflows into India, RBI is likely to buy dollars to prevent excessive rupee appreciation.

How many of the statements given above are correct?