All questions of Industry and Infrastructure for BPSC (Bihar) Exam

I didn't get the purpose of this ridiculous question in this test till now.

The correct answer is option 'D': None of the above.

Explanation:

The World Bank is an international financial institution that provides loans and grants to the governments of poorer countries for the purpose of pursuing capital projects. It aims to reduce poverty and improve living standards by promoting sustainable economic growth, investing in human capital, and fostering resilience to global challenges.

To understand why option 'D' is the correct answer, let's analyze the other options and their objectives:

a) To provide guarantee on private loans: One of the objectives of the World Bank is to provide guarantees on private loans to encourage investment in developing countries. Guaranteeing private loans helps to mobilize additional financing for development projects, as it reduces the risk for financial institutions. This option is aligned with the objectives of the World Bank.

b) To develop production facilities in underdeveloped countries: Another objective of the World Bank is to promote economic development in underdeveloped countries. This includes supporting the development of production facilities and infrastructure to stimulate economic growth, create jobs, and reduce poverty. Developing production facilities is an important aspect of the World Bank's work to improve the economic conditions of underdeveloped countries.

c) To rehabilitate war-ruined economies: The World Bank also plays a crucial role in post-conflict situations by helping to rebuild and rehabilitate war-ruined economies. This involves providing financial and technical assistance to countries affected by conflicts, enabling them to recover and rebuild their economies. Rehabilitating war-ruined economies is a key objective of the World Bank in promoting stability and sustainable development in conflict-affected regions.

Given that all of the options mentioned are aligned with the objectives of the World Bank, the correct answer is 'D': None of the above.

Governing Body of IFC

The International Finance Corporation (IFC) is a member of the World Bank Group and is governed by a board of governors. The board of governors consists of representatives from the 184 member countries. They meet once a year to discuss the policies, strategies, and activities of the IFC. The board of governors is responsible for providing guidance and oversight to ensure that the IFC operates in accordance with its mandate and objectives.

Mobilization of Capital in International Capital Markets

One of the key functions of the IFC is to mobilize capital in international capital markets. This means that the IFC raises funds from various sources, such as institutional investors, sovereign wealth funds, and private sector organizations, to finance its projects and investments in developing countries. The IFC plays a crucial role in attracting private sector investment to regions and sectors that are considered risky or underserved.

The IFC mobilizes capital in several ways:

1. Bond Issuances: The IFC issues bonds in international capital markets to raise funds. These bonds are attractive to investors because they are backed by the creditworthiness of the IFC and offer competitive returns. The proceeds from these bond issuances are used to finance the IFC's operations and investments.

2. Syndications: The IFC often partners with commercial banks and other financial institutions to co-finance projects in developing countries. Through syndications, the IFC mobilizes additional capital from the private sector to support its investments. This allows the IFC to leverage its resources and expand its impact.

3. Equity Investments: The IFC also makes equity investments in companies and projects in developing countries. These investments provide capital to support the growth and development of businesses, and the IFC's participation often attracts additional investment from other investors.

4. Financial Intermediaries: The IFC works with financial intermediaries, such as banks and microfinance institutions, to increase access to finance for small and medium-sized enterprises (SMEs) in developing countries. By providing funding and technical assistance to these intermediaries, the IFC helps them expand their lending activities and reach underserved markets.

Overall, the IFC plays a crucial role in mobilizing capital from international capital markets to support private sector development in developing countries. Its efforts help bridge the financing gap and promote economic growth and poverty reduction.

Balance of Trade and Capital Account in International Economics

Balance of Trade:
- The balance of trade is a record of all economic transactions between the residents of a country and the rest of the world.
- It specifically refers to the difference between the value of a country's exports and the value of its imports over a certain period of time.
- The balance of trade is a component of the broader current account, which also includes trade in services, income from investments, and unilateral transfers.

Capital Account:
- The capital account, on the other hand, records transactions related to the purchase and sale of assets between residents and non-residents.
- This includes transfers of financial assets such as stocks, bonds, and real estate, as well as non-financial assets like patents and trademarks.
- It also includes capital transfers, such as debt forgiveness and migrants' transfers of funds.

Difference between Balance of Trade and Capital Account:
- The balance of trade focuses specifically on transactions related to the exchange of goods and services between countries.
- It is part of the current account, which also includes trade in services, income from investments, and unilateral transfers.
- The capital account, on the other hand, records transactions related to the purchase and sale of assets between residents and non-residents.
- It includes both financial and non-financial assets, as well as capital transfers.

Correct statements:
i. A double entry system of record of all economic transactions between the residents of a country and rest of the world is called balance of trade. This statement is incorrect because the balance of trade specifically refers to the difference between the value of a country's exports and the value of its imports, not all economic transactions.

ii. All transactions related to goods, services, or income are classified as the capital account. This statement is incorrect as well. While the capital account does include transactions related to the purchase and sale of assets, it does not include transactions related to goods, services, or income. Those transactions are recorded in the current account.

Therefore, the correct answer is option 'D' - none of the statements is right.

Statement i: SDRs cannot voluntarily be exchanged among members for currencies

Explanation:
- Special Drawing Rights (SDRs) are international reserve assets created by the International Monetary Fund (IMF).
- SDRs are used as a supplementary international reserve asset, and their value is based on a basket of major currencies including the US dollar, euro, Chinese yuan, Japanese yen, and British pound.
- SDRs are allocated to IMF member countries to supplement their official reserves.
- Member countries can use SDRs to settle international transactions, diversify their reserve holdings, and for other purposes approved by the IMF.
- However, SDRs cannot be voluntarily exchanged among members for currencies.
- This means that a member country cannot simply exchange their SDRs for the currency of another member country.
- The exchange of SDRs for currencies is subject to certain conditions and requires the consent of both the member country and the IMF.
- This condition ensures the stability and integrity of the SDR system and prevents misuse or speculative activities.

Statement ii: US is the largest member of the IMF

Explanation:
- The International Monetary Fund (IMF) is an international organization that aims to promote global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
- The IMF has 190 member countries, and each member country holds a certain number of quota shares in the organization.
- The quota shares determine the voting power, financial contribution, and access to IMF resources of each member country.
- The United States has the largest quota and is therefore the largest member of the IMF.
- The US quota currently stands at around 17.46% of the total quota shares, giving it a significant influence on the decision-making processes and policies of the IMF.
- The US also has the largest financial contribution to the IMF, which further strengthens its position as the largest member.

Conclusion:
- Based on the explanations above, Statement i is correct as SDRs cannot be voluntarily exchanged among members for currencies.
- Statement ii is also correct as the US is indeed the largest member of the IMF.