UPSC Prelims 2015 · CSAT

Question 42: Reading Comprehension

Passage beginning “The Global Financial Stability Report finds…” — Passage – 2 · as printed by UPSC

Which among the following is the most rational and critical inference that can be made from the above passage ?

aForegin portfolio investments are not good for emerging economies.

bAdvanced economies undermine the global financial stability.

cIndia should desist from accepting foreign portfolio investments in the future.

dEmerging economies are at a risk of shock from advanced economies.

AnswerUPSC’s answer is (d).

The report notes that advanced economies' share in emerging markets' debt and equity investment has doubled to 12 percent, and warns that a reversal of the US Federal Reserve's easing policy could hit global financial stability in a chain reaction. The inference is that emerging economies face the risk of shocks from advanced economies' policy shifts. The passage does not condemn foreign portfolio investment, blame advanced economies for instability, or tell India to refuse such funds.

Why each option is right or wrong

(a) Wrong: the passage flags a risk, but never says these investments are bad for emerging economies.
(b) Wrong: the risk is from a policy reversal, not from advanced economies deliberately undermining stability.
(c) Wrong: advising India to refuse such investment is a prescription the passage does not make.
(d) Right: heavy reliance on advanced-economy portfolio money exposes emerging economies to shocks.

Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2015, General Studies Paper II (CSAT), Series A. The paper on upsc.gov.in.