External Sector: BoP, FDI & Exchange Rate PYQs

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1. Prelims 2002Q70External Sector: BoP, FDI & Exchange Rate

   Global capital flows to developing countries increased significantly during the nineties. In view of the East Asian financial crisis and the Latin American experience, which type of inflow is considered safest for the host country?

   aCommercial loansbForeign Direct InvestmentcForeign Portfolio InvestmentdExternal Commercial Borrowings
2. Prelims 2002Q133External Sector: BoP, FDI & Exchange Rate

   A country is said to be in debt trap if

   ait has to abide by the conditionalities imposed by the International Monetary Fundbit has to borrow to make interest payments on outstanding loanscit has been refused loans or aid by creditors abroaddthe World Bank charges a very high rate of interest on outstanding as well as new loans
3. Prelims 2002Q137External Sector: BoP, FDI & Exchange Rate

   Consider the following statements: Full convertibility of the rupee may mean

   1.Its free float with other international currencies.

   2.Its direct exchange with any other international currency at any prescribed place inside and outside the country.

   3.It acts just like any other international currency.

   Which of these statements are correct?

   a1 and 2b1 and 3c2 and 3d1, 2 and 3
4. Prelims 2001Q31External Sector: BoP, FDI & Exchange RateAnswer disputed

   Assertion (A): Ceiling on foreign exchange for a host of current account transaction heads was lowered in the year 2000. Reason (R): There was a fall in foreign currency assets also.

   aBoth A and R are individually true, and R is the correct explanation of AbBoth A and R are individually true, but R is NOT a correct explanation of AcA is true, but R is falsedA is false, but R is true
5. Prelims 2001Q85External Sector: BoP, FDI & Exchange Rate

   The largest share of Foreign Direct Investment (1997-2000) went to

   aFood and food product sectorbEngineering sectorcElectronics and electric equipment sectordService sector
6. Prelims 2000Q29External Sector: BoP, FDI & Exchange Rate

   Consider the following statements:

   The Indian rupee is fully convertible

   I.In respect of Current Account of Balance of Payment.

   II.In respect of Capital Account of Balance of Payment.

   III.Into gold.

   Which of these statements is/are correct?

   aI alonebIII alonecI and IIdI, II and III
7. Prelims 2000Q33External Sector: BoP, FDI & Exchange Rate

   Resurgent India Bonds were issued in US Dollar, Pound Sterling and

   aJapanese YenbDeutsche MarkcEurodFrench Franc
8. Prelims 1999Q46External Sector: BoP, FDI & Exchange Rate

   The economic crisis in the latter half of 1990s most seriously affected Indonesia, Thailand, Malaysia and South Korea. The cause of the crisis was

   amismanagement of the financial resources and financial sector, in generalbthe prolonged over-valuation of local currencies vis-à-vis the western currenciescthe downswing and recession in the western economies which earlier provided export market to these export-oriented countriesdNone of the above
9. Prelims 1999Q99External Sector: BoP, FDI & Exchange Rate

   Assertion (A): Devaluation of a currency may promote export.

   Reason (R): Price of the country's products in the international market may fall due to devaluation.

   aBoth A and R are true, and R is the correct explanation of AbBoth A and R are true, but R is not a correct explanation of AcA is true, but R is falsedA is false, but R is true
10. Prelims 1998Q16External Sector: BoP, FDI & Exchange Rate

    Consider the following statements: The price of any currency in the international market is decided by the

    I.World Bank

    II.Demand for goods/services provided by the country concerned

    III.Stability of the government of the concerned country

    IV.Economic potential of the country in question Of these statements:

    aI, II, III and IV are correctbII and III are correctcIII and IV are correctdI and IV are correct
11. Prelims 1998Q91External Sector: BoP, FDI & Exchange Rate

    Which one of the following is the correct sequence of decreasing order of the given currencies in terms of their value in Indian Rupees?

    aUS dollar, Canadian dollar, New Zealand dollar, Hong Kong dollarbUS dollar, New Zealand dollar, Canadian dollar, Hong Kong dollarcUS dollar, Hong Kong dollar, New Zealand dollar, Canadian dollardUS dollar, Hong Kong dollar, Canadian dollar, New Zealand dollar
12. Prelims 1998Q93External Sector: BoP, FDI & Exchange Rate

    Capital Account Convertibility of the Indian Rupee implies

    athat the Indian Rupee can be exchanged by the authorised dealers for travelbthat the Indian Rupee can be exchanged for any major currency for the purpose of trade in goods and servicescthat the Indian Rupee can be exchanged for any major currency for the purpose of trading financial assetsdNone of the above
13. Prelims 1996Q34External Sector: BoP, FDI & Exchange RateAnswer disputed

    One of the important goals of the economic liberalisation policy is to achieve full convertibility of the Indian rupee. This is being advocated because

    aconvertibility of the rupee will stabilize its exchange value against major currencies of the worldbit will attract more foreign capital inflow in Indiacit will help promote exportsdit will help India secure loans from the world financial markets at attractive terms
14. Prelims 1996Q51External Sector: BoP, FDI & Exchange Rate

    Hawala transactions relate to payments

    areceived in rupees against overseas currencies and vice versa without going through the official channelsbreceived for sale/transfer of shares without going through the established stock exchangescreceived as commission for services rendered to overseas investors/buyers/sellers in assisting them to get over the red tape and/or in getting preferential treatmentdmade to political parties or to individuals for meeting election expenses
15. Prelims 1995Q27External Sector: BoP, FDI & Exchange Rate

    As part of the liberalisation programme and with a view to attracting foreign exchange, the Government and the RBI have devised two schemes known as FCNR-‘A’ and FCNR-‘B’.

    Which of the following is/are true regarding these two schemes?

    I.Under scheme ‘A’ RBI bears exchange rate fluctuations.

    II.Under scheme ‘B’, other banks are to meet out the difference in exchange rate fluctuations.

    III.Both the schemes stand withdrawn now.

    IV.Only scheme ‘A’ has been withdrawn.

    Select the correct answer from the codes given below:

    aIII onlybI and IIcI, II and IIIdI, II and IV
16. Prelims 1995Q35External Sector: BoP, FDI & Exchange Rate

    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:

    aI, II and IVbIII and IVcI, II and IIIdI, II, III and IV