Economic Impact of Geopolitical Conflicts and Sanctions

Statement 1 is incorrect. Typically, the RBI uses open market operations to sell government securities to drain money from the system and control inflation. Buying government securities would inject money into the system, potentially fueling inflation further. Statement 2 is correct. Selling dollars in the market - If the rupee is rapidly depreciating, the RBI might intervene in the foreign exchange market by selling dollars from its reserves. This increased supply of dollars in the market can help stabilize the exchange rate and slow down the depreciation of the rupee. Statement 3 is correct. Lower interest rates in the US/EU make India a more attractive destination for foreign investment, leading to a large inflow of dollars. This causes the rupee to strengthen (appreciate). To prevent the rupee from appreciating too rapidly and hurting exporters, the RBI buys the excess dollars from the market.

Not depending on short-term foreign borrowings: This reduces exposure to capital flight. During a crisis, foreign investors may pull their money out of emerging markets like India, leading to rupee depreciation and financial instability. By limiting short-term foreign borrowings, India can lessen the impact of such capital flight. Opening up to more foreign banks: While this might seem beneficial, it can also increase reliance on foreign capital. During a crisis, foreign banks might be more likely to restrict credit, negatively impacting the Indian economy. Maintaining full capital account convertibility: This allows for the free movement of capital in and out of the country. While it can be beneficial in normal times, it can also exacerbate capital flight during a crisis. Therefore, the most prudent strategy is to reduce dependence on short-term foreign borrowings to minimize the vulnerability caused by potential capital flight. Hence, only statement 1 is correct. Hence, option A is the correct answer.

Statement 1 is Correct: The International Monetary and Financial Committee (IMFC) serves as a vital forum for discussing global economic issues and providing guidance to the International Monetary Fund (IMF). It brings together finance ministers, central bank governors, and other high-level officials from member countries to discuss challenges and opportunities facing the global economy. They also advise the IMF on its policy direction and work program. Statement 2 is Correct: The World Bank, while a separate institution, collaborates closely with the IMF. While not a formal member of the IMFC, the World Bank typically participates as an observer in IMFC meetings. This allows for better coordination and exchange of information between the two institutions on matters of mutual interest, such as global economic stability and development. Hence, option C is the correct answer.

Statement 1 is correct: This is the primary objective of the Gold Monetization Scheme (GMS). The scheme encourages individuals and institutions to deposit their idle physical gold (jewellery, coins, bars) with banks. This gold is then melted, assayed, and added to the country's gold reserves, which can be lent to jewellers, thereby bringing it into the formal economy. Statement 2 is incorrect: These schemes are focused on managing domestic gold supply and demand. They are not designed to attract Foreign Direct Investment (FDI). Policies related to FDI in the jewellery sector are separate from these schemes. Statement 3 is correct: This is a core objective of both schemes.
* The Sovereign Gold Bond (SGB) Scheme provides a financial alternative to buying physical gold. By shifting demand from physical gold to paper gold, it helps reduce the demand for gold imports.
* The Gold Monetization Scheme (GMS) increases the domestic supply of recycled gold available to jewellers, thus reducing their reliance on imported gold. Both schemes aim to curb gold imports, which are a major component of India's import bill and contribute significantly to the Current Account Deficit (CAD).

* The term "West Texas Intermediate" (WTI), often seen in news reports, refers to a grade of crude oil. WTI is used as a benchmark for oil pricing in North America. * Specifically, WTI is a light, sweet crude oil, meaning it has a low density and low sulfur content. This makes it easier and more desirable to refine into gasoline and other products. WTI serves as one of the main benchmarks for oil prices globally. * West Texas Intermediate (WTI) and Brent Crude are two of the most important global benchmarks for crude oil prices. Brent Index is used as a benchmark for oil pricing globally, including Europe, Asia, and Africa.