SHORT PASSAGE (INFERENCE) Like other emerging-market economies, India is suffering from uncertainty surrounding the U.S. Federal Reserve’s intentions on monetary policy -- specifically, the prospect of higher U.S. interest rates. But India is feeling more pain than most others, and for this can thank its government. Economic policy is in disarray. To restore strong and stable growth, India will have to curb public borrowing, reduce its external deficit, attract foreign investment and get inflation back down. Thanks to the gridlock in New Delhi, the RBI is being asked to do it all with the one and a half policies at its disposal: interest rates (a powerful economic tool) and foreign-exchange intervention (a puny one). That’s impossible, and it would be a big mistake for the RBI to try. Q. What can be inferred from the passage? 1) Strong and stable growth is inversely proportional to public borrowing. 2) Interest rate is the powerful tool through which RBI can restore growth. 3) US federal Reserve will shortly increase the interest rate. 4) None of these.
Posted on: Mon, 02 Sep 2013 10:54:07 +0000
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