Correct option is A
"Priya is playing in the garden" in direct speech is accurately transformed to "Priya was playing in the garden" in indirect speech, reflecting the shift in tense from present continuous to past continuous, as the reporting verb is in the past tense.
Rule of Conversion: Present continuous in direct speech changes to past continuous in indirect speech to show that the action was ongoing in the past when reported.
Example: She said, "I am working" -> She said that she was working.