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?

Let's analyze each statement regarding the Digital Rupee (e₹), India's Central Bank Digital Currency (CBDC): 1. **Statement 1 is correct.** The Digital Rupee is indeed a sovereign currency issued by the RBI, and its issuance is a part of the RBI's monetary policy framework, aiming to provide a digital form of fiat currency. 2. **Statement 2 is correct.** Like physical currency, the Digital Rupee issued by the central bank represents a liability for the RBI. It is a direct claim on the central bank, just like banknotes. Therefore, it appears on the liability side of the RBI's balance sheet. 3. **Statement 3 is incorrect.** No currency, digital or physical, is inherently 'insured against inflation by its very design'. Inflation is a macroeconomic phenomenon reflecting the decrease in the purchasing power of money over time. While a CBDC might offer efficiency gains or new monetary policy tools, it does not, by its design, prevent or insure against inflation. Its value would still be subject to market forces and the overall economic conditions that drive inflation. 4. **Statement 4 is correct.** The Digital Rupee is designed to be fully interchangeable and convertible with commercial bank money (deposits) and physical cash. This interoperability is crucial for its adoption and seamless integration into the existing financial system. Therefore, statements 1, 2, and 4 are correct.