{"id":1716,"date":"2024-03-28T22:58:25","date_gmt":"2024-03-28T17:28:25","guid":{"rendered":"https:\/\/lotusarise.com\/qna\/?p=1716"},"modified":"2024-04-03T07:16:13","modified_gmt":"2024-04-03T01:46:13","slug":"q-if-another-global-financial-crisis-happens-in-the-near-future-which-of-the-following-actions-policies-are-most-likely-to-give-some-immunity-to-india","status":"publish","type":"post","link":"https:\/\/lotusarise.com\/qna\/upsc\/q-if-another-global-financial-crisis-happens-in-the-near-future-which-of-the-following-actions-policies-are-most-likely-to-give-some-immunity-to-india","title":{"rendered":"Q. If another global financial crisis happens in the near future, which of the following actions\/policies are most likely to give some immunity to India?"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">(1) Not depending on short-term foreign borrowings<br>(2) Opening up to&nbsp;<strong>more foreign banks<\/strong><br>(3) Maintaining&nbsp;<strong>full capital account convertibility<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Select the correct answer using the code given below :<\/p>\n\n\n\n<ul class=\"mcq wp-block-list\">\n<li>1 only<\/li>\n\n\n\n<li>1 and 2 only<\/li>\n\n\n\n<li>3 only<\/li>\n\n\n\n<li>1, 2 and 3<\/li>\n<\/ul>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\"><strong>Answer: (a) 1 only<\/strong><\/p>\n<\/blockquote>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"notes-hd-660526c180355\">Notes:<\/h5>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Both<strong>&nbsp;international creditors<\/strong>\u00a0and the<strong>&nbsp;debtor<\/strong>\u00a0nations suffer\u00a0significant<strong>&nbsp;hardships<\/strong>\u00a0due to a\u00a0<strong>global financial crisis&nbsp;<\/strong>and\u00a0are\u00a0<strong>forced into default<\/strong>.\n<ul class=\"wp-block-list\">\n<li>Both economic and political considerations leave it difficult to resist coming to the aid of a distressed nation or region.<\/li>\n\n\n\n<li>So,&nbsp;<strong>India should not depend&nbsp;on short-term foreign borrowings<\/strong>. It will surely&nbsp;<strong>provide immunity to India<\/strong>.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Opening up to More Foreign Banks can have benefits in terms of bringing in more capital and potentially more efficient banking services, it does not necessarily provide immunity against a global financial crisis.\u00a0<strong>In fact, it could increase vulnerability<\/strong>\u00a0in some cases.\u00a0<strong>Foreign banks may quickly repatriate capital in times of global stress, exacerbating liquidity issues<\/strong>\u00a0in the domestic market.\n<ul class=\"wp-block-list\">\n<li>The<strong>&nbsp;financial crisis<\/strong>&nbsp;will most likely increase the<strong>&nbsp;NPA&nbsp;<\/strong>(Non-performing Assets)<strong>&nbsp;burden on banks<\/strong>&nbsp;making the&nbsp;<strong>banks&nbsp;inefficient in NPA recovery<\/strong>&nbsp;and declaring&nbsp;<strong>themselves insolvent<\/strong>&nbsp;in near future.<\/li>\n\n\n\n<li>So,<strong>&nbsp;opening up to more foreign banks<\/strong>&nbsp;<strong>would&nbsp;be a huge risk<\/strong>&nbsp;for India.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Capital account convertibility<\/strong>\u00a0means the\u00a0<strong>freedom to conduct investment transactions without any constraints<\/strong>.\n<ul class=\"wp-block-list\">\n<li>Typically, it would mean<strong>&nbsp;no restrictions on the amount&nbsp;you can convert into foreign currency to enable you to acquire any foreign asset and vice versa<\/strong>.<\/li>\n\n\n\n<li>While it can encourage foreign investment and economic integration with global markets, full capital account convertibility also increases vulnerability to global financial shocks.&nbsp;<strong>It can lead to rapid and large-scale capital outflows during times of global financial stress, destabilizing the domestic financial system.<\/strong><\/li>\n\n\n\n<li>During a financial crisis, it will be<strong>&nbsp;a huge failure and mistake<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>(1) Not depending on short-term foreign borrowings(2) Opening up to&nbsp;more foreign banks(3) Maintaining&nbsp;full capital account convertibility Select the correct answer using the code given below : Answer: (a) 1 only Notes:<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[1,3],"tags":[38],"years":[53],"class_list":["post-1716","post","type-post","status-publish","format-standard","hentry","category-upsc","category-prelims","tag-indian-economy","years-53"],"acf":[],"taxonomy_info":{"category":[{"value":1,"label":"UPSC"},{"value":3,"label":"Prelims"}],"post_tag":[{"value":38,"label":"Indian 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