External Sector & Capital Flows

Statement 1 is Correct: The OEKO-TEX certification ensures that textiles are rigorously tested and proven free from harmful substances, heavy metals, and toxic chemicals. This certification acts as a major endorsement, directly enhancing the global marketability of Eri Silk and allowing Indian exporters to confidently compete in high-end international markets that prioritize sustainable, chemical-free, and ethically produced textiles. Statement 2 is Correct: The certification confirms that a textile meets strict international safety, environmental, and human health standards. This is highly valued by buyers in premium, eco-conscious global markets, particularly in Europe and North America. Combined with its Geographical Indication (GI) status and reputation as a cruelty-free "peace silk," the certification cements Eri Silk's position as a premium eco-friendly fabric, enabling its entry into these premium markets. Therefore, both statements are correct, making the correct option C.

Statement 1 is Incorrect: The Vizhinjam International Seaport is designed as an international container transshipment hub, not an exclusively domestic cargo hub. Rather than reducing reliance on coastal shipping, a transshipment hub relies heavily on a "hub-and-spoke" model, where large mother ships offload cargo that is then distributed to other Indian ports via smaller coastal feeder vessels. Furthermore, it actively seeks to attract foreign shipping lines and global integration, rather than eliminating foreign collaborations. Statement 2 is Incorrect: While the port has provisions for a cruise terminal, its primary focus is handling international container transshipment and multi-purpose cargo. It is not primarily focused on passenger cruise tourism or heritage shipping. Statement 3 is Correct: Vizhinjam leverages its natural deep draft of 18 to 24 meters, allowing it to berth Ultra Large Container Ships (ULCS) that previously bypassed Indian ports. Situated just 10 nautical miles from the busy East-West international shipping corridor, it aims to reclaim transshipment cargo historically handled by foreign hubs like Colombo, Singapore, and Jebel Ali. This structural shift reduces dependence on foreign ports, retains an estimated $200 to $400 million annually in transshipment revenues, and repositions India in regional maritime trade. Therefore, option D is the correct answer.

The International Bank for Reconstruction and Development (IBRD) is a key arm of the World Bank Group, originally created for post-war reconstruction and now focused on development in middle-income nations. ✅ Statement I: Correct The IBRD provides loans and guarantees to middle-income and creditworthy low-income countries. ❌ Statement II: Incorrect The IBRD does not work single-handedly; it collaborates with other arms of the World Bank Group like IDA, IFC, etc. ✅ Statement III: Correct It was established in 1944 to help Europe rebuild after World War II.

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.

Statement 1 is correct: While NBFCs do not have routine, direct access to the Liquidity Adjustment Facility (LAF) like scheduled commercial banks, they can access RBI liquidity indirectly through eligible participants such as Primary Dealers and banks, and through special liquidity windows and RBI operations linked to LAF mechanisms. Statement 2 is correct: Foreign Institutional Investors (now FPIs) are permitted to invest in Government Securities (G-Secs) and Treasury Bills. The RBI has even introduced the Fully Accessible Route (FAR), which allows non-residents to invest in specified government bonds without any investment upper limit. Statement 3 is correct: To develop a robust corporate and government bond market, the RBI and SEBI have permitted Stock Exchanges to set up dedicated debt trading platforms. For example, the NSE's Wholesale Debt Market (WDM) and Retail Debt Market (RDM) provide transparent platforms for these transactions.

* Korkai, Poompuhar, and Muchiri were well-known ancient port cities in South India. These cities were prominent centres of trade and maritime activities during ancient times, particularly during the Sangam period (300 BCE to 300 CE). * Please Note: In the Sangam Literature - the word ‘Puhar’ referred to harbour towns.

* Statement I is correct In 2021, Switzerland exported $86.7B in Gold, making it the 1st largest exporter of Gold in the world. Switzerland is consistently the world's leading gold-exporting country based on value. (Please note: The list is dynamic & keeps varying yearly) * Statement II is not correct. The United States is way out in front as the country with the largest gold reserves in the world at 8,000 tonnes (as of 2024). * In India, the largest resources of gold ore (primary) are located in Bihar (44%) followed by Rajasthan (25%), Karnataka (21%), West Bengal (3%), Andhra Pradesh (3% ), Jharkhand (2 %). The remaining 2% resources of ore are located in Chhattisgarh, Madhya Pradesh, Kerala, Maharashtra and Tamil Nadu. (PIB 2021) * India is one of the largest gold importers, sourcing 800-1,000 tons annually, mainly from Switzerland, the UAE, and South Africa. Imports are driven by high domestic demand for jewelry and investment. Gold exports, primarily in jewelry, target the US, UAE, and Hong Kong, supporting India's trade through its jewelry manufacturing sector.

* Sterilisation refers to the actions taken by a central bank to offset the impact of its foreign exchange operations on the domestic money supply.  * When a central bank intervenes in the foreign exchange market by buying or selling foreign currencies, it affects the domestic money supply.  * Open Market Operations (OMO) is one of the primary tools used by central banks, including the Reserve Bank of India (RBI), to conduct monetary policy.  * In OMO, the central bank buys or sells government securities (bonds) in the open market to influence the liquidity in the economy. When the RBI conducts OMO, it impacts the money supply in the economy. If the RBI buys government securities, it injects money into the system, increasing the money supply. To prevent this injection of money from creating inflationary pressures, the RBI engages in sterilisation.  * Sterilisation involves the simultaneous sale or purchase of other securities, typically treasury bills, to offset the impact of the initial open market operation.

* Statement I is incorrect: India's share in global merchandise trade is only 1.8% and 4% in global services. India plans to increase its export share in global trade from 2.1% to 3% by 2027 and 10% by 2047. * Statement II is correct: The PLI scheme is open to both domestic and international manufacturers. Samsung as well as Indian firms such as Dixon Technologies, UTL, Neolyncs, Lava International, Optiemus Electronics and Micromax are also expanding their factories to take advantage of the PLI scheme.

* 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.