External Sector & Capital Flows

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 World Trade Organization (WTO) has an agreement called the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). TRIPS requires member countries to protect Geographical Indications (GIs). GIs identify a product as originating from a specific geographical location where its qualities or reputation are essentially due to that origin. India enacted the Geographical Indications of Goods (Registration and Protection) Act, 1999 to comply with its obligations under the TRIPS agreement of the WTO.

The Digital Single Market Strategy refers to an initiative by the European Union (EU) that aims to create a unified digital market across all member states. Overall, the Digital Single Market Strategy aims to stimulate growth in the European digital economy by fostering innovation, competition, and consumer confidence in the online marketplace.

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.

Domestic Content Requirement (DCR) is a policy tool used by governments to encourage local industries to grow and reduce dependence on imports. In the context of solar power production, DCR mandates that a certain percentage of solar equipment used in the production process must be domestically produced. This policy is aimed at promoting indigenous manufacturing and reducing dependence on imports.

The Broad-based Trade and Investment Agreement (BTIA) is negotiated between India and the European Union (EU).

The trade facilitation decision is a multilateral deal to simplify customs procedures by reducing costs and improving their speed and efficiency. Statement 1 is correct. India has ratified the Trade Facilitation Agreement (TFA) of the WTO. This signifies India's official acceptance and implementation of the agreement's provisions. Statement 2 is correct. The TFA is indeed a part of the WTO's Bali Ministerial Package of 2013. This package refers to a collection of agreements reached during the Ninth Ministerial Conference of the World Trade Organization in Bali, Indonesia. The TFA was a landmark achievement within this package. Statement 3 is incorrect. The Trade Facilitation Agreement (TFA) came into force in February 2017, not January 2016. It required ratification by two-thirds of WTO members before taking effect.

The SDR is an international reserve asset created by the International Monetary Fund (IMF) and not a single currency. Its value is based on a basket of five major world currencies - US Dollar (USD)
- Euro (EUR)
- Japanese Yen (JPY)
- British Pound Sterling (GBP)
- Chinese Renminbi (RMB) (added in 2016) The IMF reviews the composition of the SDR basket every five years to ensure it reflects the relative importance of currencies in the global trading and financial system. The inclusion of the RMB in 2016 signified the growing importance of the Chinese economy in the world.

The 'Global Financial Stability Report' is prepared by the International Monetary Fund (IMF). The Global Financial Stability Report is a semiannual report published by the IMF that assesses the stability of the global financial system and emerging market financing. It highlights potential risks and vulnerabilities in the financial system and provides policy recommendations to promote financial stability.

Statement 1 is Correct. The International Finance Corporation (IFC) is indeed an arm of the World Bank Group, a group of five international organizations that work together to fight poverty and promote sustainable development. The IFC specifically focuses on encouraging growth in the private sector of developing countries. Statement 2 is Correct. Masala bonds are rupee-denominated bonds issued by foreign entities (public or private sector) outside of India. These bonds raise capital for the issuer in Indian rupees, providing an alternative funding source. Therefore, the correct answer is 1 and 2 both are correct.