With reference to the Indian economy, consider the following statements: 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy government securities. 2. If the rupee is rapidly depreciating, RBI is likely to sell dollars in the market. 3. If interest rates in the USA or European Union were to fall, that is likely to induce RBI to buy dollars. Which of the statements given above are correct?

1. Incorrect. To curb high inflation, RBI generally follows contractionary monetary policy and sells government securities in open market operations to absorb liquidity; buying securities injects liquidity.

2. Correct. If the rupee is rapidly depreciating, RBI may sell dollars from its forex reserves to increase dollar supply in the market and support the rupee.

3. Correct. If interest rates in the USA/EU fall, capital may move toward emerging markets like India, putting appreciation pressure on the rupee; RBI may buy dollars to manage excess inflows and prevent sharp appreciation.

Therefore, statements 2 and 3 only are correct.