Daily Quiz #2 UPSC Prelims Marathon – September 3, 2019

Explanation: International Debt Statistics (IDS), successor to Global Development Finance and World Debt Tables, is designed to respond to user demand for timely, comprehensive data on trends in external debt in low- and middle-income countries. The World Bank’s Debtor Reporting System (DRS), from which the aggregate and country tables presented in this report are drawn, was established in 1951. World Debt Tables, the first publication that included DRS external debt data, appeared in 1973 and gained increased attention during the debt crisis of the 1980s. Since then, the publication and data have undergone numerous revisions and iterations to address the challenges and demands posed by the global economic conditions

Explanation: India’s foreign exchange earning capacity was always poor and hence it had all possible provisions to check the foreign exchange outflow, be it for current purposes or capital purposes (remember the draconian FERA). But the process of economic reforms has changed the situation to unidentifiable levels.
•Current Account: Current account is today fully convertible (operationalized on 19 August, 1994). It means that the full amount of the foreign exchange required by someone for current purposes will be made available to him at official exchange rate and there could be an un prohibited outflow of foreign exchange (earlier it was partially convertible). India was obliged to do so as per Article VIII of the IMF which prohibits any exchange restrictions on current international transactions (keep in mind that India was under preconditions of the IMF since 1991).
•Capital Account: After the recommendations of the S.S. Tarapore Committee (1997) on Capital Account Convertibility, India has been moving in the direction of allowing full convertibility in this account, but with required precautions.

Explanation: The Extended fund Facility (EFF) is a service provided by the IMF to its member countries which authorises them to raise any amount of foreign exchange from it to fulfill their BoP crisis, but on the conditions of structural reforms in the economy put by the body. It is the first agreement of its kind. India had signed this agreement with the IMF in the financial year 1981-82.

Explanation: It is the international currency in which the highest faith is shown and is needed by every economy. The strongest currency of the world is one which has a high level of liquidity. Basically, the economy with the highest as well as highly diversified exports that are compulsive imports for other countries (as of high-level technology, defence products, life saving medicines and petroleum products) will also create high demand for its currency in the world and become the hard currency. It is always scarce. Up to the Second World War, the best hard currency was the Pound Sterling (£) of the UK, but soon it was replaced by the US Dollar. Some of the best
Hard currencies of the world today are the US Dollar, the Euro(€), Japanese Yen (¥) and the UK Sterling Pound (£). Meanwhile, by late 2015, the IMF allowed the SDR to be denominated in the chinese ‘Yaan’–paving the way for a new hard currency to be implemented in 2016.

Explanation: The special economic zone (SEZ) policy was announced by the government in 2000 which was concretized through the SEZ Act, 2005. It mainly aims to develop ‘export hubs’ in the country to promote growth and development. As an idea it was not new—India had set up Asia’s first ‘export processing zone’ (EPZ) in Kandla in 1965 itself. Later on the idea got another encouragement through the ‘export oriented units’ (EOUs). After the SEZ policy was formalized through an Act, the EOUs and EPZs are open to conversion to SEZ.