Explanation:

First, depreciation (devaluation) of currency increases the volume of exports and reduces the volume of imports, both of which have a favourable effect on the balance of trade, that is, they will lower the trade deficit or increase the trade surplus.

• The Rupee is falling against the dollar primarily because of the growing trade deficit -- imports are increasing at a much higher pace than exports. The increase in imports is mainly due to a sharp increase in crude oil prices following the Ukraine crisis. The increase in the import bill for coal and other essential commodities particularly raw materials has bloated the import bill. A weaker rupee will make these imports more expensive, which will have a short-term negative effect on domestic production and GDP as a whole.

• The biggest impact of a weakening rupee is inflation, given India imports more than 80% of its crude oil.

• Depreciation reduces the value of a country's currency when compared with the currency of other countries. Depreciation discourages imports because the imported goods become more expensive due to a reduction in the value of rupee. As the goods become more and more expensive it leads to rising inflation.

Hence option 1st is correct.