Which of the following best describes the term ‘import cover’, sometimes seen in the news?
It is the ratio of value of imports to the Gross Domestic Product of a country
It is the total value of imports of a country in a year
It is the ratio between the value of exports and that of imports between two countries
It is the number of months of imports that could be paid for by a country's international reserves
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Answer is Wrong!
This question was previously asked in
UPSC IAS – 2016
– It indicates how many months a country can continue to pay for imports if its sources of foreign exchange earnings (like exports, remittances, capital inflows) were to cease.
– A higher import cover indicates a stronger external position and greater resilience to external shocks. A common benchmark is 3-4 months of import cover, considered adequate by many international financial institutions.