UPSC Prelims 1995 · General Studies
Question 35: Economy and Social Development
Which of the following pairs are correctly matched? I. Increase in foreign exchange reserves ................. Monetary expansion II. Low import growth rate in India ...................... Recession in Indian Industry III. Euro issues ................ Shares held by Indian companies in European countries IV. Portfolio investment ............... Foreign institutional investors Select the correct answer by using the following codes:
AnswerThe answer is (a).
A rise in foreign exchange reserves means the RBI bought foreign currency and paid in rupees, which expands the money supply. Low import growth, since industry depends on imported inputs and capital goods, goes with slow industrial growth. Portfolio investment means foreign institutional investors buying shares and bonds. Euro issues are not shares held abroad by Indian companies: they are shares or bonds raised by Indian companies in European markets. Remember: reserves up, money supply up.
- I. RBI buying foreign exchange releases rupees, expanding money supply.
- II. Industry depends on imports of inputs and capital goods, so low import growth goes with industrial slowdown.
- III. Euro issues are raised by Indian companies in European markets, not shares they hold there.
- IV. Portfolio investment is mostly by foreign institutional investors in shares and bonds.
Why each option is right or wrong
- (a) Right: I, II and IV.
- (b) Includes III, which is wrong, and leaves out I and II.
- (c) Includes III, which is wrong, and leaves out IV.
- (d) Includes III, which is wrong.
Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 1995, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.