Current Affairs Questions for CLAT | QB Set 8

The Indian rupee has fallen sharply against the U.S. dollar in recent months, crossing ₹96 per dollar in May 2026. A weaker rupee means India has to pay more for imports such as crude oil, electronics, and machinery. Economists believe that rising trade deficits, global geopolitical tensions, and foreign investors withdrawing money from Indian markets are the major reasons behind the decline. When Foreign Portfolio Investors (FPIs) sell Indian assets and move funds to safer markets like the U.S., demand for dollars increases while demand for the rupee falls. The Reserve Bank of India (RBI) has been intervening by using foreign exchange reserves to stabilise the currency and prevent excessive depreciation. While a weaker rupee may make Indian exports cheaper and more competitive globally, it also increases inflationary pressure by making imported goods and fuel more expensive for businesses and consumers.

1. The Indian rupee crossed which mark against the U.S. dollar in May 2026?
A. ₹85
B. ₹96
C. ₹75
D. ₹100

2. Which of the following is a major reason behind the fall of the Indian rupee?
A. Increase in exports
B. Foreign investors withdrawing money from India
C. Fall in global oil prices
D. Rise in agricultural production

3. What happens when Foreign Portfolio Investors (FPIs) withdraw investments from India?
A. Demand for dollars increases
B. Demand for the rupee increases
C. Oil imports decrease
D. Exports stop completely

4. Which institution intervenes to stabilise the rupee using foreign exchange reserves?
A. SEBI
B. NITI Aayog
C. Reserve Bank of India
D. Finance Commission

5. One possible advantage of a weaker rupee is that it can:
A. Reduce imports completely
B. Eliminate inflation
C. Increase foreign debt instantly
D. Make Indian exports cheaper globally

Answers With Explanation

1. Answer: B. ₹96
The rupee crossed the ₹96-per-dollar mark in May 2026, reflecting a sharp depreciation against the U.S. dollar.

2. Answer: B. Foreign investors withdrawing money from India
Foreign investors selling Indian assets and shifting funds abroad increases demand for dollars and weakens the rupee.

3. Answer: A. Demand for dollars increases
When FPIs exit Indian markets, they convert rupees into dollars, which raises demand for the U.S. currency.

4. Answer: C. Reserve Bank of India
The RBI uses India’s forex reserves to intervene in currency markets and prevent excessive depreciation of the rupee.

5. Answer: D. Make Indian exports cheaper globally
A weaker rupee makes Indian products relatively cheaper for foreign buyers, helping exporters compete internationally.