Hormuz to home, India’s resilience in uncertain times

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.

Statement 1 is correct: The Federal Reserve's monetary policy decisions, particularly regarding interest rates, can impact global capital flows. If the Fed raises interest rates, it can make US investments more attractive, potentially leading to some outflow of capital from India. This could affect demand for Indian government bonds and influence their yield. Statement 2 is correct: The RBI's monetary policy plays a crucial role in influencing Indian government bond yields. The RBI's actions like setting repo rates, open market operations, and cash reserve ratio (CRR) can affect the overall liquidity in the banking system. Higher liquidity can lead to lower yields, and vice versa. Statement 3 is correct: Inflation expectations and short-term interest rates are important factors for investors when considering the return on government bonds. Higher inflation expectations can lead investors to demand higher yields to compensate for the potential erosion of purchasing power. Similarly, short-term interest rates can act as a benchmark for bond yields. Therefore, all three factors significantly influence the yields of Indian government bonds.

* Statement 1 is correct. The nominal Effective Exchange Rate (NEER) is a measure of the value of a country's currency against a basket of other currencies weighted by their importance in trade. If NEER increases, it means that the value of the currency has increased relative to the currencies in the basket, indicating appreciation. * Statement 2 is incorrect. The Real Effective Exchange Rate (REER) takes into account both nominal exchange rates and relative price levels (inflation) between countries. An increase in REER means that the country's currency is overvalued relative to its trading partners, which can reduce trade competitiveness. * Statement 3 is correct. If domestic inflation is higher than inflation in other countries, the real value of the domestic currency decreases faster than the nominal value, causing a divergence between NEER and REER. Therefore, the correct statements are 1 and 3.

* 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.

Nationalisation: Yes, the coal sector was nationalised by the Indira Gandhi government in phases during the 1970s. Hence, Statement 1 is Correct. Coal block allocation: Coal blocks are not allocated through a lottery system. They are currently allocated through auctions, a shift from the previous system of administrative allocation. Hence, Statement 2 is Incorrect. Coal self-sufficiency: India is not entirely self-sufficient in coal production. While domestic production has increased, there is still a gap that is met through imports. Hence, Statement 3 is Incorrect.

Statement 1 is Incorrect: Share of agriculture in GDP has actually decreased since 1991, as the service sector has grown significantly. Statement 2 is Correct: Share of India's exports in world trade has increased. India has become a more integrated part of the global economy, with a larger export footprint. Statement 3 is Correct: FDI inflows have increased considerably. The liberalisation measures made India a more attractive destination for foreign investment. Statement 4 is Correct: India's foreign exchange reserves have also increased enormously. This reflects India's improved ability to generate foreign currency and manage its external finances. Therefore, the correct answer is 2, 3, and 4 only. Hence, option B is the correct answer.

Statements 1 and 3 are correct. Vietnam’s open economic policy of recent years integrating into global supply chains has made the growth success story possible. Vietnam's export-led growth strategy and global integration are among the key factors behind the country's remarkable achievements in growth and poverty. Vietnam was one among the few countries to post GDP growth rate figures in 2020 when the pandemic hit. Vietnam is projected to be the fastest-growing internet economy in Southeast Asia in the next 10 years. Statement 2 is not correct. Vietnam is a one-party communist state, not a multi-party parliamentary democracy. Statement 4 is correct. Thanks to an abundance of low-wage labour, Vietnam's manufacturing sector grew at a compound annual growth in the last decade. As the rest of East Asia developed and wages there rose, global manufacturers were lured by Vietnam's low labour costs and stable exchange rate. Hence, Statement 5 is not correct. According to the Asian Development Bank Report, e-services including digital financial services are at a very nascent stage in Vietnam.

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.

Critical minerals are essential for modern technologies and clean energy, but many countries, including India, depend on imports for several of them. To strengthen supply chains, India has joined international partnerships and reformed mining laws. ✅ Statement I: Correct India joined the Minerals Security Partnership (MSP) in 2023 to ensure reliable access to critical minerals. ❌ Statement II: Incorrect India is not resource-rich in all 30 critical minerals it has identified and remains import-dependent for several, like cobalt and nickel. ✅ Statement III: Correct In 2023, Parliament amended the Mines and Minerals Act, giving the Central Government power to auction leases for critical minerals.

Participatory Note (P-Note): This is a financial instrument issued by registered foreign portfolio investors (FPIs) to overseas investors. It allows overseas investors to participate in the Indian stock market indirectly without directly registering with the Securities and Exchange Board of India (SEBI). The FPI holds the underlying Indian securities, and the P-Note represents ownership for the overseas investor. The other options are not used for this purpose: Certificate of Deposit (CD): Issued by banks to raise short-term funds, not related to stock markets. Commercial Paper (CP): Short-term debt instrument issued by companies, not related to foreign investment in stocks. Promissory Note: A written promise to repay a debt, not used in this context of stock market participation.

The article states, "Nearly a fifth of global oil consumption passes through this narrow waterway, making it indispensable to global energy security and international trade."

The article mentions, "The government relied on a combination of supply diversification, diplomatic engagement, inventory management and coordinated action with public sector energy companies to ensure uninterrupted availability of petroleum products. Retail fuel prices have been managed prudently, helping to moderate inflationary pressures."

The article states, "The RBI’s steady communication and measures such as forex swap facilities, scheme for raising foreign currency deposits from non-resident Indians as well as rationalisation of taxes on foreign portfolio investors (FPI) have been critical in strengthening India’s external sector resilience." Retail fuel price management was a government effort, not directly by RBI.