{"id":91685,"date":"2025-06-01T11:02:36","date_gmt":"2025-06-01T11:02:36","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=91685"},"modified":"2025-06-01T11:02:36","modified_gmt":"2025-06-01T11:02:36","slug":"in-the-context-of-india-which-of-the-following-factors-is-are-contrib","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/in-the-context-of-india-which-of-the-following-factors-is-are-contrib\/","title":{"rendered":"In the context of India, which of the following factors is\/are contrib"},"content":{"rendered":"<p>In the context of India, which of the following factors is\/are contributor\/contributors to reducing the risk of a currency crisis?<\/p>\n<ul>\n<li>1. The foreign currency earnings of India&#8217;s IT sector<\/li>\n<li>2. Increasing the government expenditure<\/li>\n<li>3. Remittances from Indians abroad<\/li>\n<\/ul>\n<p>Select the correct answer using the code given below.<\/p>\n<p>[amp_mcq option1=&#8221;1 only&#8221; option2=&#8221;1 and 3 only&#8221; option3=&#8221;2 only&#8221; option4=&#8221;1, 2 and 3&#8243; correct=&#8221;option2&#8243;]<\/p>\n<div class=\"psc-box-pyq-exam-year-detail\">\n<div class=\"pyq-exam\">\n<div class=\"psc-heading\">This question was previously asked in<\/div>\n<div class=\"psc-title line-ellipsis\">UPSC IAS &#8211; 2019<\/div>\n<\/div>\n<div class=\"pyq-exam-psc-buttons\"><a href=\"\/pyq\/pyq-upsc-ias-2019.pdf\" target=\"_blank\" class=\"psc-pdf-button\" rel=\"noopener\">Download PDF<\/a><a href=\"\/pyq-upsc-ias-2019\" target=\"_blank\" class=\"psc-attempt-button\" rel=\"noopener\">Attempt Online<\/a><\/div>\n<\/div>\n<section id=\"pyq-correct-answer\">\nThe question asks which factors contribute to reducing the risk of a currency crisis in India. A currency crisis is often associated with insufficient foreign exchange reserves to meet external obligations or defend the currency&#8217;s value against speculative attacks. Factors that increase foreign currency inflows or reduce dependence on foreign currency outflows help mitigate this risk.<br \/>\nStatement 1: The foreign currency earnings of India&#8217;s IT sector represent significant inflows of foreign exchange, boosting the country&#8217;s reserves. This directly helps in building a buffer against potential crises and reduces the risk.<br \/>\nStatement 3: Remittances from Indians abroad are also a major source of foreign currency inflow into India. Similar to IT sector earnings, remittances augment foreign exchange reserves and contribute to external stability, thus reducing the risk of a currency crisis.<br \/>\nStatement 2: Increasing government expenditure, if not financed sustainably, can lead to higher fiscal deficits. This can potentially exacerbate current account deficits (if it stimulates imports) or lead to inflation, which can erode confidence in the currency and potentially increase the risk of external instability, rather than reduce it.<br \/>\nTherefore, factors 1 and 3 contribute to reducing the risk of a currency crisis, while factor 2 is generally considered a potential risk factor if not managed prudently.<br \/>\n<\/section>\n<section id=\"pyq-key-points\">\nStrong foreign currency inflows from sources like IT exports and remittances increase foreign exchange reserves, which act as a buffer against currency crises. Unchecked increases in government expenditure can potentially increase external vulnerabilities.<br \/>\n<\/section>\n<section id=\"pyq-additional-information\">\nA currency crisis typically involves a sharp decline in the value of a country&#8217;s currency, often accompanied by a depletion of foreign exchange reserves and difficulties in servicing external debt. Building up foreign exchange reserves through exports, services earnings, remittances, and foreign investment inflows is a key strategy for preventing such crises. Conversely, large and persistent current account deficits, unsustainable fiscal policies, excessive external borrowing, and capital flight can increase the vulnerability to a currency crisis.<br \/>\n<\/section>\n","protected":false},"excerpt":{"rendered":"<p>In the context of India, which of the following factors is\/are contributor\/contributors to reducing the risk of a currency crisis? 1. The foreign currency earnings of India&#8217;s IT sector 2. Increasing the government expenditure 3. Remittances from Indians abroad Select the correct answer using the code given below. [amp_mcq option1=&#8221;1 only&#8221; option2=&#8221;1 and 3 only&#8221; &#8230; <\/p>\n<p class=\"read-more-container\"><a title=\"In the context of India, which of the following factors is\/are contrib\" class=\"read-more button\" href=\"https:\/\/exam.pscnotes.com\/mcq\/in-the-context-of-india-which-of-the-following-factors-is-are-contrib\/#more-91685\">Detailed Solution<span class=\"screen-reader-text\">In the context of India, which of the following factors is\/are contrib<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1092],"tags":[1119,1226],"class_list":["post-91685","post","type-post","status-publish","format-standard","hentry","category-upsc-ias","tag-1119","tag-external-sector-of-economy","no-featured-image-padding"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>In the context of India, which of the following factors is\/are contrib<\/title>\n<meta name=\"description\" content=\"The question asks which factors contribute to reducing the risk of a currency crisis in India. A currency crisis is often associated with insufficient foreign exchange reserves to meet external obligations or defend the currency&#039;s value against speculative attacks. Factors that increase foreign currency inflows or reduce dependence on foreign currency outflows help mitigate this risk. Statement 1: The foreign currency earnings of India&#039;s IT sector represent significant inflows of foreign exchange, boosting the country&#039;s reserves. This directly helps in building a buffer against potential crises and reduces the risk. Statement 3: Remittances from Indians abroad are also a major source of foreign currency inflow into India. Similar to IT sector earnings, remittances augment foreign exchange reserves and contribute to external stability, thus reducing the risk of a currency crisis. Statement 2: Increasing government expenditure, if not financed sustainably, can lead to higher fiscal deficits. This can potentially exacerbate current account deficits (if it stimulates imports) or lead to inflation, which can erode confidence in the currency and potentially increase the risk of external instability, rather than reduce it. Therefore, factors 1 and 3 contribute to reducing the risk of a currency crisis, while factor 2 is generally considered a potential risk factor if not managed prudently. Strong foreign currency inflows from sources like IT exports and remittances increase foreign exchange reserves, which act as a buffer against currency crises. Unchecked increases in government expenditure can potentially increase external vulnerabilities.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/in-the-context-of-india-which-of-the-following-factors-is-are-contrib\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"In the context of India, which of the following factors is\/are contrib\" \/>\n<meta property=\"og:description\" content=\"The question asks which factors contribute to reducing the risk of a currency crisis in India. A currency crisis is often associated with insufficient foreign exchange reserves to meet external obligations or defend the currency&#039;s value against speculative attacks. Factors that increase foreign currency inflows or reduce dependence on foreign currency outflows help mitigate this risk. Statement 1: The foreign currency earnings of India&#039;s IT sector represent significant inflows of foreign exchange, boosting the country&#039;s reserves. This directly helps in building a buffer against potential crises and reduces the risk. Statement 3: Remittances from Indians abroad are also a major source of foreign currency inflow into India. Similar to IT sector earnings, remittances augment foreign exchange reserves and contribute to external stability, thus reducing the risk of a currency crisis. Statement 2: Increasing government expenditure, if not financed sustainably, can lead to higher fiscal deficits. This can potentially exacerbate current account deficits (if it stimulates imports) or lead to inflation, which can erode confidence in the currency and potentially increase the risk of external instability, rather than reduce it. Therefore, factors 1 and 3 contribute to reducing the risk of a currency crisis, while factor 2 is generally considered a potential risk factor if not managed prudently. Strong foreign currency inflows from sources like IT exports and remittances increase foreign exchange reserves, which act as a buffer against currency crises. Unchecked increases in government expenditure can potentially increase external vulnerabilities.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/in-the-context-of-india-which-of-the-following-factors-is-are-contrib\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-01T11:02:36+00:00\" \/>\n<meta name=\"author\" content=\"rawan239\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rawan239\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"In the context of India, which of the following factors is\/are contrib","description":"The question asks which factors contribute to reducing the risk of a currency crisis in India. A currency crisis is often associated with insufficient foreign exchange reserves to meet external obligations or defend the currency's value against speculative attacks. Factors that increase foreign currency inflows or reduce dependence on foreign currency outflows help mitigate this risk. Statement 1: The foreign currency earnings of India's IT sector represent significant inflows of foreign exchange, boosting the country's reserves. This directly helps in building a buffer against potential crises and reduces the risk. Statement 3: Remittances from Indians abroad are also a major source of foreign currency inflow into India. Similar to IT sector earnings, remittances augment foreign exchange reserves and contribute to external stability, thus reducing the risk of a currency crisis. Statement 2: Increasing government expenditure, if not financed sustainably, can lead to higher fiscal deficits. This can potentially exacerbate current account deficits (if it stimulates imports) or lead to inflation, which can erode confidence in the currency and potentially increase the risk of external instability, rather than reduce it. Therefore, factors 1 and 3 contribute to reducing the risk of a currency crisis, while factor 2 is generally considered a potential risk factor if not managed prudently. Strong foreign currency inflows from sources like IT exports and remittances increase foreign exchange reserves, which act as a buffer against currency crises. Unchecked increases in government expenditure can potentially increase external vulnerabilities.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/exam.pscnotes.com\/mcq\/in-the-context-of-india-which-of-the-following-factors-is-are-contrib\/","og_locale":"en_US","og_type":"article","og_title":"In the context of India, which of the following factors is\/are contrib","og_description":"The question asks which factors contribute to reducing the risk of a currency crisis in India. A currency crisis is often associated with insufficient foreign exchange reserves to meet external obligations or defend the currency's value against speculative attacks. Factors that increase foreign currency inflows or reduce dependence on foreign currency outflows help mitigate this risk. Statement 1: The foreign currency earnings of India's IT sector represent significant inflows of foreign exchange, boosting the country's reserves. This directly helps in building a buffer against potential crises and reduces the risk. Statement 3: Remittances from Indians abroad are also a major source of foreign currency inflow into India. Similar to IT sector earnings, remittances augment foreign exchange reserves and contribute to external stability, thus reducing the risk of a currency crisis. Statement 2: Increasing government expenditure, if not financed sustainably, can lead to higher fiscal deficits. This can potentially exacerbate current account deficits (if it stimulates imports) or lead to inflation, which can erode confidence in the currency and potentially increase the risk of external instability, rather than reduce it. Therefore, factors 1 and 3 contribute to reducing the risk of a currency crisis, while factor 2 is generally considered a potential risk factor if not managed prudently. Strong foreign currency inflows from sources like IT exports and remittances increase foreign exchange reserves, which act as a buffer against currency crises. Unchecked increases in government expenditure can potentially increase external vulnerabilities.","og_url":"https:\/\/exam.pscnotes.com\/mcq\/in-the-context-of-india-which-of-the-following-factors-is-are-contrib\/","og_site_name":"MCQ and Quiz for Exams","article_published_time":"2025-06-01T11:02:36+00:00","author":"rawan239","twitter_card":"summary_large_image","twitter_misc":{"Written by":"rawan239","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/exam.pscnotes.com\/mcq\/in-the-context-of-india-which-of-the-following-factors-is-are-contrib\/","url":"https:\/\/exam.pscnotes.com\/mcq\/in-the-context-of-india-which-of-the-following-factors-is-are-contrib\/","name":"In the context of India, which of the following factors is\/are contrib","isPartOf":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#website"},"datePublished":"2025-06-01T11:02:36+00:00","dateModified":"2025-06-01T11:02:36+00:00","author":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/5807dafeb27d2ec82344d6cbd6c3d209"},"description":"The question asks which factors contribute to reducing the risk of a currency crisis in India. A currency crisis is often associated with insufficient foreign exchange reserves to meet external obligations or defend the currency's value against speculative attacks. Factors that increase foreign currency inflows or reduce dependence on foreign currency outflows help mitigate this risk. Statement 1: The foreign currency earnings of India's IT sector represent significant inflows of foreign exchange, boosting the country's reserves. This directly helps in building a buffer against potential crises and reduces the risk. Statement 3: Remittances from Indians abroad are also a major source of foreign currency inflow into India. Similar to IT sector earnings, remittances augment foreign exchange reserves and contribute to external stability, thus reducing the risk of a currency crisis. Statement 2: Increasing government expenditure, if not financed sustainably, can lead to higher fiscal deficits. This can potentially exacerbate current account deficits (if it stimulates imports) or lead to inflation, which can erode confidence in the currency and potentially increase the risk of external instability, rather than reduce it. Therefore, factors 1 and 3 contribute to reducing the risk of a currency crisis, while factor 2 is generally considered a potential risk factor if not managed prudently. Strong foreign currency inflows from sources like IT exports and remittances increase foreign exchange reserves, which act as a buffer against currency crises. Unchecked increases in government expenditure can potentially increase external vulnerabilities.","breadcrumb":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/in-the-context-of-india-which-of-the-following-factors-is-are-contrib\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/exam.pscnotes.com\/mcq\/in-the-context-of-india-which-of-the-following-factors-is-are-contrib\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/exam.pscnotes.com\/mcq\/in-the-context-of-india-which-of-the-following-factors-is-are-contrib\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/exam.pscnotes.com\/mcq\/"},{"@type":"ListItem","position":2,"name":"UPSC IAS","item":"https:\/\/exam.pscnotes.com\/mcq\/category\/upsc-ias\/"},{"@type":"ListItem","position":3,"name":"In the context of India, which of the following factors is\/are contrib"}]},{"@type":"WebSite","@id":"https:\/\/exam.pscnotes.com\/mcq\/#website","url":"https:\/\/exam.pscnotes.com\/mcq\/","name":"MCQ and Quiz for Exams","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/exam.pscnotes.com\/mcq\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/5807dafeb27d2ec82344d6cbd6c3d209","name":"rawan239","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/761a7274f9cce048fa5b921221e7934820d74514df93ef195a9d22af0c1c9001?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/761a7274f9cce048fa5b921221e7934820d74514df93ef195a9d22af0c1c9001?s=96&d=mm&r=g","caption":"rawan239"},"sameAs":["https:\/\/exam.pscnotes.com"],"url":"https:\/\/exam.pscnotes.com\/mcq\/author\/rawan239\/"}]}},"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/posts\/91685","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/comments?post=91685"}],"version-history":[{"count":0,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/posts\/91685\/revisions"}],"wp:attachment":[{"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/media?parent=91685"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/categories?post=91685"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/exam.pscnotes.com\/mcq\/wp-json\/wp\/v2\/tags?post=91685"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}