The correct option is
D The baby sits and plays in the water here.
The words, 'here' and 'in the water' are adverbs of place. Adverbs of place are usually positioned at the end of the sentence.
In options A and B, these adverbs are placed at the beginning of the sentence. Hence, options A and B are incorrect.
The preposition, 'in' is used to show where something is, whether inside a room, a container, building, vehicle, or some space, area, city or country. Eg: In the box, in the room, in the air, in the water, in a book, etc. The words, 'in the' is followed by a noun. In option C, the phrase, 'in the here' is mentioned. This phrase conveys no meaning and is grammatically incorrect. Hence, option C is incorrect.
Option D: The sentence follows the format: Subject (The baby) followed by the verb (sits and plays). Both the adverbs of place ('in the water' and 'here') are placed at the end of the sentence. This sequence is grammatically correct and forms a meaningful sentence. Hence, option D is correct.