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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:

(a) 1 only
(b) 1 and 2 only
(c) 3 only
(d) 1, 2 and 3



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1. Statement 1 is correct: Lowering or eliminating short-term foreign debt is advantageous during a GFC as it eases pressure on the balance of payments and helps stabilize the economy.

2. Statement 2 is incorrect: Opening up to foreign banks during a GFC can expose the domestic economy to external market risks, including credit risk and capital flow volatility, which may further damage the financial market.

3. Statement 3 is incorrect: Full capital account convertibility, with unrestricted movement of capital, may not provide immunity during a GFC. Unrestricted outflows of capital can worsen the situation and deplete resources.


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