INSIGHT UPSC QUIZ

 ANSWER: (B) 

Foreign trade results in connecting the markets or integration of markets in different countries. 

• MNCs are playing a major role in the globalisation process. More and more goods and services, investments and technology are moving between countries. 
• Besides the movements of goods, services, investments and technology, there is one more way in which the countries can be connected. This is through the movement of people between countries. 
• People usually move from one country to another in search of better income, better jobs or better education. (Requirement of skilled workforce does not influence globalisation).
• Rapid improvement in technology has stimulated the globalisation process. For instance, the past fifty years have seen several improvements in transportation technology. This has made much faster delivery of goods across long distances possible at lower costs. 
• Removing barriers or restrictions set by the government is what is known as liberalisation. With liberalisation of trade, businesses are allowed to make decisions freely about what they wish to import or export. 
• Thus, barriers on foreign trade and foreign investment were removed to a large extent. This meant that goods could be imported and exported easily and also foreign companies could set up factories and offices here. 

ANSWER: (B) 

Statement 1 is correct.

• Financial Sector Reforms during LPG era
• Financial sector includes financial institutions, such as commercial banks, investment banks, stock exchange operations and foreign exchange market. The financial sector in India is regulated by the Reserve Bank of India (RBI). 
• You may be aware that all banks and other financial institutions in India are regulated through various norms and regulations of the RBI. 
• The RBI decides the amount of money that the banks can keep with themselves, fixes interest rates, nature of lending to various sectors, etc. 
• One of the major aims of financial sector reforms is to reduce the role of RBI from regulator to facilitator of financial sector. 
• This means that the financial sector may be allowed to take decisions on many matters without consulting the RBI. 

Statement 2 is correct.

• The reform policies led to the establishment of private sector banks, Indian as well as foreign. Foreign investment limit in banks was raised to around 74 per cent. 
• Those banks which fulfil certain conditions have been given freedom to set up new branches without the approval of the RBI and rationalise their existing branch networks.
• Though banks have been given permission to generate resources from India and abroad, certain managerial aspects have been retained with the RBI to safeguard the interests of the account-holders and the nation. 

Statement 3 is not correct.

• Foreign Institutional Investors (FII), such as merchant bankers, mutual funds and pension funds, are now allowed to invest in Indian financial markets.