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Question No. 152Interactive Test Mode
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Q152. 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:

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:
Select the correct option below (or cross out options to eliminate)

Official Answer Key & Detailed Solution

Ready to check the official UPSC Answer Key?

Click any option above to test yourself under exam conditions, or reveal the explanation directly.

Official UPSC Answer KeyUPSC Prelims 2020 • Indian Economy

Correct Answer: Option (A) — 1 only

Concept & Option Breakdown

Standard Reference Verified

Statement 1 is correct: Avoiding dependence on short-term foreign borrowings reduces vulnerability to external shocks and sudden capital outflows (flight to safety) during global liquidity crunches.

Statement 2 is incorrect: Increasing foreign bank penetration enhances contagion channels from parent international banks facing distress abroad to the domestic economy.

Statement 3 is incorrect: Full capital account convertibility allows unrestricted cross-border capital mobility, which can exacerbate sharp capital flight during global financial panics.

Elimination Heuristic & Exam Approach

In a global crisis, greater financial openness (full capital account convertibility, more foreign banks) transmits external shocks faster. Restricting short-term external debt acts as a buffer.

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Question Specifications & Syllabus Mapping

Examination & YearUPSC Civil Services Preliminary Examination 2020 (Q152)
Paper & Marking SchemeGS Paper I • 2 Marks (-0.66 Negative for incorrect response)
Syllabus Subject & TopicIndian Economy → Banking & Financial System
Official Answer KeyOption (A) — 1 only

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Frequently Asked Questions — UPSC Prelims 2020 Q152

What is the official answer for UPSC Prelims 2020 GS Paper I Question 152 (Indian Economy)?

The official UPSC answer key for this 2020 Indian Economy (Banking & Financial System) question is Option (A): "1 only". Correct attempts carry 2 Marks with -0.66 Negative penalty for wrong answers.

Which UPSC Prelims syllabus topic does this 2020 question belong to?

This question belongs to GS Paper I under the subject "Indian Economy" and micro-topic "Banking & Financial System". You can explore all repeated questions from Banking & Financial System in Acme AI's 3D Prelims PYQ Realm or practice 50 full-length and sectional tests in the APT Prelims Test Series.

How can I solve this Banking & Financial System UPSC Prelims question using option elimination?

In a global crisis, greater financial openness (full capital account convertibility, more foreign banks) transmits external shocks faster. Restricting shortterm external debt acts as a buffer.

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