Which of the following is not a source of demand for foreign exchange in India?

Foreign direct investment from abroad.

The correct answer is Option (2) → Foreign direct investment from abroad.

Demand for foreign exchange arises when foreign currency is needed to make payments to other countries — for example:

• Imports of goods and services (like machines from abroad)

• Repayment of foreign loans

• Indian investors investing abroad

However, Foreign Direct Investment (FDI) from abroad brings foreign currency into India, increasing the supply of foreign exchange, not the demand.