Q. Which exchange rate system does India use in its forex market?
Answer: Managed floating exchange rate system
Notes: India adopted the managed floating exchange rate system in 1993. The Reserve Bank of India allows the rupee’s value to be determined by demand and supply but intervenes to control volatility. The Foreign Exchange Management Act, 1999, governs currency management. India does not peg its rupee to any specific foreign currency. RBI interventions involve buying or selling foreign currency from reserves.