Read the following passage and answer the items that follow Your answers to these items should ...........

English Comprehension Reading Comprehension (C)

Read the following passage and answer the items that follow. Your answers to these items should be based on the passages only.

Private investment in general is volatile. Foreign private investment is more volatile because the available investment avenues are significantly greater (i.e., the entire world). Therefore, the responsibility of providing employment cannot be left to Foreign Direct investment (FDl). The current FDI inflows are volatile over time and across sectors and regions, which is a necessary consequence of their search for the highest returns. The adverse consequences are unstable employment and an accentuation of income and regional inequalities. A probable positive consequence of foreign investment is the inflow of new technology and its subsequent diffusion. However, the technology diffusion is not at all certain because the existing state of physical and human capital in India may prove inadequate for the diffusion.

With reference to the above passage, the following assumptions have been made:

Relying on foreign investment in the long run is not an economically sound policy.
Policies must be undertaken to reduce volatility in foreign private investment.
Policies must be undertaken to strengthen domestic private investment.
Public investment should be given priority over private investment.
Substantial public investment in education and health should be undertaken. Which of the above assumptions is/are valid?

This questions was previously asked in

Complete-Test, Previous year (2020)

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1, 2 and 4

1, 3 and 5

2, 4 and 5

3 only

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Explanation:

Sol. Ans.(b). Theme is “nature of private investment and employment”.

The passage is talking about the nature of private investment and its fickle tendency. It explains why employment generation cannot be left to foreign private investment, and even its positive effects may get diluted due to inherent problems in Indian human capital.

So, statement 1 is surely correct.It is definitely assumed in it. Why? When we are constantly worried about the fickle nature of FDI (and local private investment), and its negative relation with employment generation, how can we rely on it as an economic policy? If 1 is correct, then options (a) and (b) are possible answers but not (c) or (d).

Now between (a) and (b), we have to check 2 and 3.

Focus on 2 – India can do nothing to reduce volatility in FDI because it is the inherent nature of FDI to seek higher returns (hence fickle – moves from here to there). Note the phrase “a necessary consequence”. So 2 is wrong. But 3 may be right, and 5 is surely right (last part of the passage).

Why is 5 right? Education and health are bottlenecks (in absorbing new technology) so public investments will help.

Hence, correct answer is option (b). Also note that 4 is not explicitly talked about anywhere.