Consider the following statements in respect of the digital rupee : 1. It is a sovereign currency issued by the Reserve Bank of India (RBI) in alignment with its monetary policy. 2. It appears as a liability on the RBI's balance sheet. 3. It is insured against inflation by its very design. 4. It is freely convertible against commercial bank money and cash. Which of the statements given above are correct ?

Statement 1 is correct. The digital rupee (CBDC) is envisioned as a digital form of India's sovereign currency (the Rupee), issued directly by the Reserve Bank of India (RBI) in accordance with its monetary policy objectives. Statement 2 is correct. Similar to physical currency, CBDC represents a direct liability of the central bank (RBI) to the holder. It is essentially a claim on the central bank. Statement 3 is incorrect. The design of the digital rupee does not inherently provide insurance against inflation. Like physical currency, its purchasing power would be subject to macroeconomic factors and inflationary pressures managed by the RBI through monetary policy. Its value is pegged 1:1 with the physical rupee. Statement 4 is correct. As a digital equivalent of physical currency, the digital rupee is intended to be freely convertible with other forms of money, such as commercial bank deposits (commercial bank money) and physical cash.