The answer to the above question is (a) i.e. only 1 statement | ECONOMY by VIVEK SINGH

The answer to the above question is (a) i.e. only 1 statement is correct

Explanation:
If a foreign investor is coming to India for making investment that means he is going to purchase Land and machinery and other materials in India to set up business/factory.

Now if rupee is depreciating (in nominal terms without increase in inflation) then the foreign investor will get more rupees per dollar and he will be able to purchase more land/machinery/material in the same dollar, so he will get attracted to invest in India. But if rupee depreciates in nominal terms because of higher inflation then the gain from the rupee depreciation (for the investor) will cancel out because of the higher inflation as the price of land/machinery/materials will also increase.

Now if rupee is depreciating in real terms that means our goods (land/machinery/materials) are becoming relatively cheaper so it will attract foreign investors for investment in India.
If rupee is depreciating in real terms that means after taking into account the effect of inflation, rupee is actually depreciating which makes our goods relatively cheaper and attracts investment in India.

If rupee depreciates in nominal terms let us say by 10% and inflation also is higher in India proportionately then both will cancel out and rupee will not depreciate in real terms. But if rupee depreciates in nominal terms by 10% and inflation is higher in India just by 2% then rupee will depreciate in real terms which makes our products competitive i.e. investment in India will be attractive.

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