BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Increase in the balance of payments deficit in India
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Reduces the balance of payments deficit in India
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Has no effect on the balance of payments position
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All of the above
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Detailed explanation-1: -Measures To Correct Disequilibrium in the BOP Quotas – Under the quota system, the government may fix and permit the maximum quantity or value of a commodity to be imported during a given period. By restricting imports through the quota system, the deficit is reduced and the balance of payments position is improved.
Detailed explanation-2: -ANSWER: Following are the causes of Deficit in BOP or Unfavourable BOP. For fast development, developing countries import machines, technology, and other equipment. This leads to a high level of outflows of foreign exchange that can result in a deficit in the BOP account.
Detailed explanation-3: -Measuring the current account The current account balance is then the trade balance plus net factor income (such as interest and dividends from foreign investments or workers’ remittances) and transfers from abroad (such as foreign aid), which are usually a small fraction of the total.
Detailed explanation-4: -India recorded a current account deficit of 3.3 per cent of GDP in H1:2022-23 on the back of a sharp increase in the merchandise trade deficit, as compared with 0.2 per cent in H1:2021-22.