Explanation
Solving
To solve this, let's break down the statement from the end:
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"My wife's grandfather's only child":
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"Daughter of my wife's father-in-law":
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"She is the sister of [that daughter]":
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If the woman is the sister of Nirmal's wife's sister, she is a Sister-in-law.
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If the woman is the sister of Nirmal's wife, she is still a Sister-in-law.
Logical Flow:
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Wife’s Grandfather’s only child=Wife’s Father
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Daughter of Wife’s Father=Wife or her Sister
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Sister of that daughter=Sister-in-law (or Wife)
Since "Sister-in-law" is provided as a specific option (Option 2) and "Wife" is Option 1, the context of these puzzles usually implies a sibling of the wife to distinguish the relationship.
Conclusion: The woman is Nirmal's Sister-in-law.