UPSC Prelims 2016 GS Paper I · Q18 of 100 Economy easy

Which of the following best describes the term 'import cover', sometimes seen in the news?

  1. (a) It is the ratio of value of imports to the Gross Domestic Product of a country
  2. (b) It is the total value of imports of a country in a year
  3. (c) It is the ratio between the value of exports and that of imports between two countries
  4. (d) It is the number of months of imports that could be paid for by a country's international reserves ✓ UPSC's answer

Why the answer is (d)

• Import cover measures how many months of imports a country's foreign exchange reserves can pay for; it is a standard gauge of external-sector resilience — option (d).

• India's reserves covered about 10–12 months of imports in recent years, against a rule-of-thumb minimum of three.

• Imports-to-GDP (a), total imports (b) and bilateral export–import ratios (c) are different measures.

• Hence option (d).

Why the other options are wrong

(a) It is the ratio of value of imports to the Gross Domestic Product of a country
Imports-to-GDP is a different ratio.
(b) It is the total value of imports of a country in a year
Total import value is not import cover.
(c) It is the ratio between the value of exports and that of imports between two countries
Bilateral trade ratios are not import cover.

Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2016, held on 7 August 2016. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.

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