The correct answer is Option 1: I, II and IV.

I. Increase in foreign exchange reserves ................. Monetary expansion:

This pairing is correct. When a country`s foreign exchange reserves increase, it typically indicates that the country`s central bank has purchased foreign currencies, which leads to an increase in the domestic money supply. This expansion of the money supply is known as monetary expansion. By acquiring foreign currencies, the central bank injects more money into the domestic economy, stimulating economic activity and potentially leading to inflationary pressures.

II. Low import growth rate in India ................. Recession in Indian Industry:

This pairing is incorrect. A low import growth rate in India does not necessarily indicate a recession in the Indian industry. Import growth rate refers to the rate at which the value of imported goods and services increases over time. A low import growth rate could be influenced by various factors such as changes in government policies, fluctuations in currency exchange rates, or shifts in global trade dynamics. It does not directly imply a recession in the Indian industry, which involves a broader set of factors affecting domestic production, employment, and economic activity.

III. Euro-issues ................ Shares held by Indian companies in European countries:

This pairing is incorrect. Euro-issues refer to debt securities denominated in euros and issued by governments, financial institutions, or corporations in countries that use the euro as their currency. It does not specifically relate to shares held by Indian companies in European countries. Shares represent ownership in a company, and their holding by Indian companies in European countries is a separate concept from euro-issues.

IV. Portfolio investment ...................... Foreign institutional investors:

This pairing is correct. Portfolio investment refers to the investment in a collection of assets, such as stocks, bonds, or mutual funds, held by an investor. Foreign institutional investors (FIIs) are institutional investors from overseas who invest in the financial markets of another country. FIIs often engage in portfolio investment, buying and selling securities in the foreign market to generate returns. They contribute to the liquidity and depth of financial markets and play a significant role in capital flows between countries.

To summarize, Option 1 (I, II, and IV) is the correct answer because it accurately matches the concepts of an increase in foreign exchange reserves with monetary expansion and portfolio investment with foreign institutional investors.