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    Question

    According to the RBI’s Financial Stability Report

    (FSR), which of the following is identified as a key near-term risk to India’s domestic financial stability?
    A High inflation Correct Answer Incorrect Answer
    B Trade deficit Correct Answer Incorrect Answer
    C Capital outflows Correct Answer Incorrect Answer
    D Industrial slowdown Correct Answer Incorrect Answer
    E Rising unemployment Correct Answer Incorrect Answer

    Solution

    The RBI’s Financial Stability Report identifies capital outflows, along with geopolitical tensions and global debt levels, as key near-term risks to India's financial stability. These risks could cause volatility in capital markets and exchange rates. Capital outflows refer to the movement of assets out of the country, which can weaken the domestic currency and pressure foreign exchange reserves. This can impact financial institutions and investment flows, making it a major concern for financial stability.

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