In the context of India, which of the following factors is/are contributor/ contributors to reducing the risk of a currency crisis?

1. The foreign currency earnings of India's IT sector
2. Increasing the government expenditure
3. Remittances from Indians abroad

Select the correct answer using the code given below.

IT Sector Earnings:

• India's IT service exports have steadily risen to around $150 billion per year. This provides a large stream of USD and other foreign currency into the economy.
• It reduces the dependence on volatile foreign portfolio flows that are riskier from a currency stability perspective.
• The increased forex reserves from IT export earnings make India less susceptible to the risk of a potential currency crash.

Government Expenditure:

• Higher fiscal spending by the government drives up imports, widens current account deficit (CAD) and leads to depletion of forex reserves, which precipitate a currency crash.
• As fiscal deficit rises, foreign investors often withdraw capital from India wary of depreciation risks. This compounds currency crash risks.

Remittances from Abroad:

• India receives over $80 billion in worker remittances annually from Indians residing overseas.
• This leads to a positive impact on India's balance of payment position and forex reserves, reducing dependence on volatile FPI inflows.
• It provides a buffer against sudden capital outflows that make the rupee more resilient when global risk sentiment worsens.