Forex Reserves, Rupee and Capital Flows Explained (BoP Part 2) | UPSC

In Part 1, India's current account deficit was small. So why did forex reserves fall $8.1 billion in April to June 2026, and why is the rupee under pressure? In Part 2, I explain how the deficit is financed, FDI vs FPI, forex reserves, the managed float, and what a weaker rupee does to the economy, for UPSC, SSC, Banking and State PCS exams. ⏱ Timestamps 0:00 Hook and recap 0:45 The financing side of the BoP 1:45 FDI, FPI, ECB and NRI deposits 3:45 The balancing equation 5:15 Forex reserves 6:30 Exchange rate and the RBI 7:45 Effects of a weaker rupee 9:00 Way forward 10:00 Quick revision 📝 Mains practice question: Why can a small current account deficit not guarantee a stable rupee? Write your answer in the comments. Core figures are from the RBI's BoP release of 1 September 2026. FPI outflows and valuation-adjusted reserves are from market reports. Please verify before using them in your answers. 👉 Watch Part 1 first if you haven't: the BoP structure and current account. #UPSC #ForexReserves #Rupee #BalanceOfPayments #UPSCEconomy #FDI #CurrentAffairs #upsc #currentaffairs #rrb #ssc #railwayexams #currentaffairs2026 #indianeconomy #indianrailways #economy #officer