Question
In the context of India, which of the following factors is/are contributor/contributors to reducing the risk of a currency crisis?
1. The foreign currency earnings of India's IT sector
2. Increasing the government expenditure
3. Remittances from Indians abroad
Select the correct answer using the code given below.
(a) 1 only
(b) 1 and 3 only
(c) 2 only
(d) 1, 2 and 3
Answer:
B
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Explanation:
The factors that contribute to reducing the risk of a currency crisis in the context of India are:
1. The foreign currency earnings of India's IT sector: The IT sector generates significant foreign currency earnings through exports of software and IT services. This helps in boosting foreign exchange reserves and strengthening the country's external position.
2. Remittances from Indians abroad: Remittances sent by Indians working abroad contribute to foreign currency inflows. These remittances provide a stable source of foreign exchange, which can help stabilize the currency and reduce the risk of a currency crisis.