Which of the following is not a source of demand for foreign exchange in India?
Answer & explanation
Correct answer: option 2
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:
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Imports of goods and services (like machines from abroad)
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Repayment of foreign loans
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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.