Which of the following is/are the reason/s for depreciation of rupee? 1. Capital outflows. 2. Rise in crude oil prices. 3. Tight monetary policy by developed countries. How many of the statements given above are correct? |ForumIAS

[A] Only one

[B] Only two

[C] Only three

[D] None

Answer: C

Notes:

Explanation: REASONS FOR DEPRECIATION OF RUPEE:

Crude Oil Prices: The crude oil prices have increased in the recent past due to geopolitical reasons such as Russia-Ukraine war and has impacted Indian rupee negatively as India imports around 85% of its crude oil demand.
Monetary Policy Tightening: After easing liquidity post COVID-19, the central banks, especially US Federal Reserves, around the world are going for tight monetary policy which is increasing demand for dollars.
Capital Outflows: The increasing interest rates in the developed countries has led to outflow of FPIs (Rs. 1.34 lakh crores in 2022). This increased the supply of rupees.
Domestic Factors in the Economy: The Indian economy has been suffering from high inflation (above 6% for three quarters), widening current account deficit due to rising trade deficit.

Source: FORUMIAS