UPSC CSE Prelims
Question 38
In the context of India, which of the following factors is/are contributor/contributors to reducing the risk of a currency crisis?
- The foreign currency earnings of India's IT sector
- Increasing the government expenditure
- Remittances from Indians abroad
Select the correct answer using the code given below.
View correct answer and explanation
Correct answer: B
Correct Option: B
Explanation:
Foreign exchange earnings from India’s IT exports and remittances supply foreign currency and reduce balance-of-payments pressure. Higher government spending does not automatically stabilise the exchange rate.
Statement / Pair Analysis:
1 (Correct): IT export revenues bring in dollars and other foreign currencies.
2 (Incorrect): More government expenditure can raise import demand and deficits; it is not inherently protective against currency crisis.
3 (Correct): Remittances from Indians abroad provide relatively stable foreign-exchange inflows.
Option-wise Analysis:
A (Incorrect): It omits true item 3 (Remittances from Indians abroad provide relatively stable foreign-exchange inflows).
B (Correct): Includes all and only the true statements/pairs.
C (Incorrect): It includes false item 2 (More government expenditure can raise import demand and deficits; it is not inherently protective…); omits true item 1 (IT export revenues bring in dollars and other foreign currencies); omits true item 3 (Remittances from Indians abroad provide relatively stable foreign-exchange inflows).
D (Incorrect): It includes false item 2 (More government expenditure can raise import demand and deficits; it is not inherently protective…).