Q. Which of the following is not a reason for fall of forex reserve of India?

[A] Exchange rate of US$ and the Euro

[B] Rising oil prices

[C] Exchange rate of Indian Rupee

[D] Inflow of funds by FPI

Answer: D

Explanation: Fall in India’s Forex Reserves:

  • From a peak of $642.45 billion in 2021, India’s foreign exchange reserves have dipped to $572.71 billion as of July 2022.
  • That’s a fall of almost $70 billion in just over 10 months. The forex fell due to outflow of funds from the domestic market by Foreign Portfolio Investors (FPIs, US$30.3 billion withdrawn since January 2022), rising oil prices, RBI’s intervention in currency market to stabilize the value of Rupee (exchange rate) and change in value of foreign currency assets due to change in exchange rate of US$ and the Euro.

Source: EPIC August 2022