If another global financial crisis happens in the near future, which of the following actions/policies are…
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:
1 only
1 and 2 only
3 only
1, 2 and 3
Solution
Avoiding dependence on short-term foreign borrowings reduces vulnerability during crises (1 correct). Foreign banks typically retreat during global crises (cross-border banking shrinks), so opening up more is risky (2 wrong). Full capital account convertibility makes economy more exposed to volatile capital flows during crises (3 wrong). Answer: (a).