Explanation –

Printing Rupees: Printing more rupees simply increases the money supply in the system, leading to inflation and worsening the rupee’s depreciation. It has detrimental long-term consequences.

Selling forex reserves: By selling US dollars from its reserves and buying rupees, the RBI can directly increase the supply of rupees in the market, putting upward pressure on its value. This is a standard intervention technique, better and a suitable approach.

Pegging the Rupee to the Dollar: While pegging the rupee to the dollar might stabilize the exchange rate, it comes at a significant cost. It limits flexibility because the Reserve Bank of India (RBI) would have to follow the interest rate decisions of the U.S. Federal Reserve. This means the RBI would lose control over its own monetary policy, possibly hurting India’s domestic economic requirements.

In addition to selling forex reserves, the RBI can also consider other measures, such as: Raising interest rates, Selling government securities, structural reforms, etc.

Source: The Times of India