Question

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?

1. Not depending on short-term foreign borrowings

2. Opening up to more foreign banks

3. Maintaining full capital account convertibility

Select the correct answer using the code given below:

(a) 1 only

(b) 1 and 2 only

(c) 3 only

(d) 1, 2 and 3

Answer 1

Correct option is (a) 1 only

Keeping full capital account convertibility will make India vulnerable to global crisis, just like the 1997's crisis among the East Asian countries. So number 3 is wrong.

If Indian Government /RBI allows opening of more foreign banks in India, there could be a dangerous scenario where foreign problems may percolate into Indian economy. So, 2 is wrong. So we are left with Answer (a) only 1.