Q. With reference to India’s exchange rate regime, consider the following statements:
1.India adopted a dual exchange rate system in the financial year 1992–93.
2.In the dual exchange rate system, the market exchange rate influences the official exchange rate.
3.Under the fixed currency regime, exchange rates are determined in the foreign exchange market.
Which of the statements given above are correct?

[A] 1 and 2 only

[B] 2 and 3 only

[C] 1 and 3 only

[D] 1, 2 and 3

Answer: A
Notes:

Explanation:

  • India implemented the dual exchange rate system in 1992–93.
  • In this system, the market-based exchange rate influences the official exchange rate.
  • In a fixed currency regime, exchange rates are not determined by market forces but are administratively set.

Source- TMH Indian Economy by Ramesh Singh

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