2015 GS Paper I, all questions
UPSC Prelims 2015 · GS Paper I
Question 34: Economy and Social Development
Convertibility of rupee implies
abeing able to convert rupee notes into gold
ballowing the value of rupee to be fixed by market forces
cfreely permitting the conversion of rupee to other currencies and vice versa
ddeveloping an international market for currencies in India
AnswerUPSC’s answer is (c).
Convertibility of a currency means the freedom to exchange it for other currencies, and other currencies for it, at the going rate. Convertibility on the current account, for trade and services, was introduced for the rupee in 1994; capital account convertibility, which covers investments and loans, is only partial. It has nothing to do with gold backing or how the exchange rate is determined.
Why each option is right or wrong
- (a) Exchange of notes for gold refers to the gold standard, not convertibility.
- (b) Market-determined exchange rate describes a floating rate, which is a different concept.
- (c) Correct: convertibility is the free exchange of rupee into other currencies and back.
- (d) An international currency market in India is not what convertibility means.
Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2015, General Studies Paper I, Series A. The paper on upsc.gov.in.