Statement 1 is correct: Devaluation of a currency means a deliberate downward adjustment of the value of a country's currency relative to another currency. This makes domestic goods cheaper for foreigners (boosting exports) and foreign goods more expensive for domestic consumers (reducing imports). As exports increase and imports decrease, the trade balance improves, which directly helps in reducing the Current Account Deficit (CAD).

Statement 2 is incorrect: Export subsidies are financial supports provided by the government to domestic exporters to make their products more competitive in the international market. Reduction in the export subsidy would make Indian goods more expensive abroad, leading to a fall in exports. A decline in exports would worsen the trade balance and, consequently, increase the CAD rather than reducing it.

Statement 3 is correct: While Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) are technically recorded under the Capital Account, they play a crucial role in managing the CAD.

Financing the Deficit: In the short term, these inflows provide the necessary foreign exchange to bridge the gap created by the CAD.

Structural Improvement: In the long term, FDI (especially in manufacturing) promotes "Import Substitution" and enhances export capacity, which structurally reduces the CAD.