The question asks about the lending policy of the International Monetary Fund (IMF). To answer this, one needs to understand the fundamental purpose and operational structure of the IMF, specifically who it provides financial assistance to.
C) It grants loans to only member countries. The IMF's financial assistance is exclusively available to its member countries to help them address balance of payments problems, stabilize their economies, and restore sustainable growth. Non-member countries are not eligible for IMF loans.
The question asks to identify the incorrect statement regarding "carbon credits". We need to evaluate each option based on our knowledge of the carbon credit system, its origins, purpose, and how it operates.
D) Carbon credits are traded at a price fixed from time to time by the United Nations Environment Programme. This statement is incorrect because the price of carbon credits is determined by market forces (supply and demand) in carbon markets, not by a fixed price set by UNEP or any other international body.
The question asks to classify the economic activity of foreign nationals visiting India for the Commonwealth Games. This involves understanding the definitions of export, import, production, and consumption in an economic context, particularly concerning services.
A) Export — When foreign nationals visit India and spend money on services like accommodation, food, transportation, and entertainment, India is providing these services to non-residents. This inflow of foreign currency for services rendered by the domestic economy to foreigners is classified as an export of services. Tourism, in general, is considered an export for the host country.
The current account deficit (CAD) occurs when a country's total imports of goods, services, and transfers exceed its total exports of goods, services, and transfers. To reduce CAD, a government needs to either increase exports or decrease imports, or attract more capital inflows. We will analyze each given action to see its impact on CAD.
D) 1 and 3. Devaluing the domestic currency makes exports cheaper and imports costlier, directly reducing CAD. Attracting FDI and FII strengthens the capital account, which helps finance CAD, and can lead to long-term improvements in the current account through increased production and exports.
The question asks to identify the components that constitute India's foreign exchange reserves. Understanding the definition and standard components of foreign exchange reserves is key to answering this question.
B) Foreign-currency assets, gold holdings of the RBI and SDRs
This option correctly lists three of the four primary components of India's foreign exchange reserves: Foreign Currency Assets, Gold Holdings of the RBI, and Special Drawing Rights (SDRs). The fourth component, Reserve Tranche Position in the IMF, is often grouped with SDRs or considered a separate but related reserve asset.
To answer this question, we need to understand the components of the Capital Account in a country's Balance of Payments (BoP). The Capital Account records all international capital transfers and financial transactions that affect the country's foreign assets and liabilities.
Correct Option: B) 1, 2 and 4