Q. Consider the following statements:
1.A significant portion of India’s foreign exchange reserves is allocated for crude purchases.
2.A reduced import bill could weaken the Indian Rupee, leading to higher inflation.
Which of the statement(s) given above is/are correct?
Answer: A
Notes:
Explanation –
Statement 1 is correct. A significant portion of India’s foreign exchange reserves is allocated for crude oil purchases.
Statement 2 is incorrect. A reduced import bill would likely strengthen the Indian Rupee, as it decreases the demand for foreign currency needed to pay for imports. A stronger Rupee can help reduce inflation by lowering the cost of imports in Rupee terms.
Source: DD News
