2019 GS Paper I, all questions

UPSC Prelims 2019 · GS Paper I

Question 86: Economy and Social Development

Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?

aCurbing imports of non-essential goods and promoting exports
bEncouraging Indian borrowers to issue rupee denominated Masala Bonds
cEasing conditions relating to external commercial borrowing
dFollowing an expansionary monetary policy

AnswerUPSC’s answer is (d).

An expansionary monetary policy, meaning lower interest rates and more money supply, would push the rupee down further: lower returns encourage capital to leave, and the extra money supply can raise inflation and imports. So it is not a measure to stop the rupee's slide. Curbing non-essential imports and promoting exports narrow the trade gap, Masala Bonds bring in foreign funds, and easing external commercial borrowing conditions increases dollar inflows.

Why each option is right or wrong
  • (a) Curbing imports and promoting exports narrows the trade deficit and supports the rupee.
  • (b) Masala Bonds raise foreign funds in rupees and support the rupee.
  • (c) Easier ECB conditions bring in more foreign currency.
  • (d) Correct: expansionary monetary policy would weaken the rupee further.

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

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Source: UPSC, Civil Services (Preliminary) Examination 2019, General Studies Paper I, Series A. The paper on upsc.gov.in.