To all your questions, India is still being looted like it was under Colonialism. Our money is devalued to help so called investors to invest in our system. But China did not follow it and yet managed to get highest ever FDI in their system. A lot needs to be explained about the years of MMS followed by Raghuram Rajan and Urjit Patel. I find no reason why we must buy dollars and create reserves at higher rates rather than use that money to boost our infra and economy. What do we get on our reserves? just about 2-3% returns but we are creating PPP models with over 12% returns in India for investors. We have become slaves yet again due to these policies.
Forex reserves are another matter
Altogether
We need to maintain forex reserves
In dollar and other currencies because we
Have a large Trade deficit and a moderate Current Account deficit
Basically the RBI lives in an ivory tower
The Entire Responsibility of the Economy
Is with the Finance Ministry
RBI was a silent co conspirator when
UPA indulged in Phone Banking Scams