India's foreign exchange reserves :

Question

UnlockIAS · Accepted Answer

Correct — A, 'Increased to around USD 640 billion as of the end of December 2024'. The Commission decided this question on a named page: its published remark of 31 October 2025 records that according to the Economic Survey 2024-25, page 79, only option (A) is correct. Paragraph 3.63 of that Survey says India's foreign exchange reserves comprise foreign currency assets, gold, Special Drawing Rights and the reserve tranche position in the IMF, and that after surpassing the USD 700 billion benchmark they moderated to USD 640.3 billion as of the end of December 2024. Round 640.3 and the option is the Survey's own figure with the Survey's own date. The next two sentences of the same paragraph dispose of both rivals. On rank, the Survey states that as of 2024 India ranked 4th globally, following China, Japan and Switzerland — not seventh. On direction, it states that supported by net positive capital inflows India's reserves recorded a notable increase of USD 27.1 billion in 2024, with foreign currency assets accounting for the bulk of that increase, and paragraph 3.64 adds that in the first half of FY25 reserves rose USD 59.4 billion, driven by a balance-of-payments surplus of USD 23.9 billion and a valuation gain of USD 35.5 billion. Calendar 2024 was therefore a year of surplus and of rising reserves, which is what makes the option's verb 'increased' defensible. One caveat you should carry honestly, because the Survey's own word is 'moderated': measured from the peak above USD 700 billion touched late in 2024, USD 640.3 billion is a fall; measured across the calendar year, it is a rise of USD 27.1 billion. Both statements are true of different windows, and the option is judged on the number and its date rather than on the verb.

Why the other options are wrong — (b) A rank precise enough to sound researched, and contradicted by the very page the Commission cited. The Economic Survey 2024-25 says that as of 2024 India had secured its place among the world's largest foreign exchange reserve-holding countries, ranking 4th globally, following China, Japan and Switzerland. Seventh feels plausible because India did sit outside the top five for much of the 2000s and stale rank tables circulate widely in coaching material, but on the document this paper was set from, the rank is four.  (c) The best-built distractor here, because its number is genuine and only its sign has been flipped. The Survey reports a balance-of-payments SURPLUS of USD 23.9 billion — 'around USD 24 billion' — in the first half of FY25, and names that surplus as one of the two drivers of a USD 59.4 billion rise in reserves over the same half-year. There was no BoP deficit of that size, and reserves rose USD 27.1 billion across calendar 2024. The option takes a real figure, inverts surplus into deficit, and attaches it to the wrong period.  (d) For (d) to hold, at least two of the three statements would have to be true together. The Survey puts India 4th and not 7th, which kills (b), and records an increase on a BoP surplus rather than a decrease on a deficit, which kills (c). Only (a) survives, so 'More than one of the above' cannot. A candidate who has verified even one of the two false statements should stop reaching for (d), especially with a one-third-mark penalty attached.

Concept: Foreign exchange reserves are the external assets held and managed by the Reserve Bank of India, and the Economic Survey defines them by their four components: foreign currency assets, gold, Special Drawing Rights and the reserve tranche position in the IMF. Loans from foreign governments or the World Bank are not reserves — they are liabilities. Reserves matter because they are the buffer that lets a country pay for imports and service external debt when capital flows reverse, and they are judged by adequacy ratios rather than by absolute size: import cover stood at 10.9 months in December 2024 against the IMF's recommended three months for emerging economies, and the stock covered about 90 per cent of India's external debt of USD 711.8 billion as of September 2024. The idea most candidates never separate is the difference between the two ways reserves move. Flows are real money crossing the border, captured by the balance-of-payments surplus or deficit. Valuation changes are the rupee-and-dollar arithmetic of holding non-dollar currencies and gold, which shifts the headline figure without a single dollar entering or leaving. The Survey splits them explicitly: FY24's improvement came from a BoP surplus of USD 63.7 billion plus a modest valuation gain of USD 4.3 billion, whereas the USD 59.4 billion rise in the first half of FY25 was USD 23.9 billion of BoP surplus and USD 35.5 billion of valuation gain — more than half of that half-year's increase was revaluation, not new inflow.

State PCS 2025 Q44 — Economy PYQ with Answer

State PCS 2025 Q44 — Economy PYQ with Answer