Question

49. Movements in the foreign exchange reserves of India occur on which of the following accounts?
1. Purchases and sales of foreign exchange by the RBI.
2. External aid receipts of the Central Government.
3. Revaluation of the assets.
Correct answer code is:

• A. Only 1 and 2
• B. Only 2 and 3
• C. Only 1 and 3
• D. All of the above

Answer 1

The correct option is D All of the above

Although both US dollar and Euro are intervention currencies and the Foreign Currency Assets (FCA) are maintained in major currencies, the foreign exchange reserves are denominated and expressed in US dollar only. Movements in the foreign exchange reserves of India occur mainly on account of purchases and sales of foreign exchange by the RBI, income arising out of the deployment of the foreign exchange reserves, external aid receipts of the Central Government and changes on account of revaluation of the assets.