UPSC General Studies Solved Paper - General Studies-2016

  • question_answer
    Which of the following best describes the term 'import cover', sometimes seen in the news?

    A)  It is the ratio of value of imports to the Gross Domestic Product of a country.

    B)  It is the total value of imports of a country in a year.

    C)  It is the ratio between the value of exports and that of imports between two countries.

    D)  It is the number of months of imports that could be paid for by a country's international reserves.

    Correct Answer: D

    Solution :

    Exp. [d] The stock of foreign exchange reserves in terms of months of retrained imports of goods as at end of year. It measures the number of months of money available in the national bank to cover the cost of imports. It is an operational definition of import cover. An import coverage ratio is the share (or percentage) of a country's own imports that is subject to a particular non-tariff barrier, or any one of a specified group of non-tariff barriers. They are calculated by attaching actual values to bilateral trade flows between various exporters and the importing country. Import cover is an important indicator of the stability of the currency. During the currency crisis of 2013, when foreign exchange reserves fell to around $275 billion, import cover dipped to around seven months. According to currency explits, eight to ten months of import cover is essential for the stability of the currency.

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