External Sector

Indian Economic System(CSC)

Title

45:30

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Indian Economy - Understanding the basics of Indian economic system

If another global fi nancial crisis happens soon, how many among the following action/ policies are most likely to give some immunity to India?

1. Not depending on short-term foreign borrowings

2. Opening more foreign banks

3. Maintaining full capital account convertibility

Select the correct answer using the code given below:

Only one

Only two

All three

None

Only one.

statement 1 is correct.

During the Global Financial crisis, the foreign banks reduce their lending and choose to retreat from cross-border banking in general, including through cutting back on the new entry.
Capital account convertibility means that there is no restriction on the conversion of the domestic currency into a foreign currency.
Any deterioration in fiscal conditions, inflation management, the balance of payments, or any other economic crisis may cause a stoppage or reversal of capital flows.