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Which one of the following groups of items is included in India’s foreign-exchange reserves?

(a)

Foreign-currency assets, Special Drawing Rights (SDRs) and loans from foreign countries

(b)

Foreign-currency assets, gold holdings of the RBI and SDRs

(c)

Foreign-currency assets, loans from the World Bank and SDRs

(d)

Foreign-currency assets, gold holdings of the RBI and loans from the World Bank

Correct Answer

(b)

Explanation

India’s foreign exchange reserves comprise foreign currency assets (FCA), gold, special drawing rights (SDRs) and reserve tranche position (RTP) in the International Monetary Fund (IMF).

Microtheme: "Foreign Exchange,Currency Devaluation" —
4 questions asked in Prelims in the past.

  1. [2022] With reference to the Indian economy, consider the following statements :
    1. An increase in Nominal Effective Exchange Rate (NEER) indicates the appreciation of rupee.
    2. An increase in the Real Effective Exchange Rate (REER) indicates an improvement in trade competitiveness.
    3. An increasing trend in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER.
    Which of the above statements are correct ?

    • (a) 1 and 2 only
    • (b) 2 and 3 only
    • (c) 1 and 3 only
    • (d) 1, 2 and 3
    Correct Answer: (C) 1 and 3 only
  2. [2021] Consider the following statements:
    The effect of devaluation of a currency is that it necessarily:
    1.Improves the competitiveness of the domestic exports in the foreign markets.
    2.Increases the foreign value of domestic currency.
    3.Improves the trade balance.
    Which of the above statements is/are correct?

    • (a) 1 only
    • (b) 1 and 2
    • (c) 3 only
    • (d) 2 and 3
    Correct Answer: (A) 1 only
  3. [2013] Which one of the following groups of items is included in India’s foreign-exchange reserves?

    • (a) Foreign-currency assets, Special Drawing Rights (SDRs) and loans from foreign countries
    • (b) Foreign-currency assets, gold holdings of the RBI and SDRs
    • (c) Foreign-currency assets, loans from the World Bank and SDRs
    • (d) Foreign-currency assets, gold holdings of the RBI and loans from the World Bank
    Correct Answer: (B) Foreign-currency assets, gold holdings of the RBI and SDRs
  4. [2012] Consider the following statements: The price of any currency in international market is decided by the
    1. World Bank
    2. Demand for goods/services provided by the country concerned
    3. Stability of the government of the concerned country
    4. Economic potential of the country in question
    Which of the statements given above are correct?

    • (a) 1, 2, 3 and 4
    • (b) 2 and 3 only
    • (c) 3 and 4 only
    • (d) 1 and 4 only
    Correct Answer: (B) 2 and 3 only