External sector & international economic bodies

Answer: (a) Conducting ‘Open Market Operations’

Sterilisation means offsetting the effect of the RBI's foreign-exchange dealings on domestic money supply. When the RBI buys dollars it releases rupees; it then sells government securities through open market operations to mop those rupees back up.

• ✓ (a) The RBI's own Working Group on Instruments of Sterilisation calls open market operations, in which the RBI sells securities, the commonly used instrument of sterilisation; the sale mops up the rupees released by forex purchases.
• ✗ (c) Debt and cash management is the RBI's role as banker and debt manager to governments; it does not by itself neutralise the liquidity impact of capital flows.
• ✗ (b) Overseeing payment and settlement systems is a regulatory function about safe transfers of money, not about controlling the money supply.

Remember · Sterilisation = RBI neutralising liquidity from forex intervention, mainly via OMOs (and the Market Stabilisation Scheme). OMO sale absorbs liquidity; OMO purchase injects it.

📘 Read it in NCERT: Class 12 Introductory Macroeconomics, Ch 3 (practise this chapter)

Question and answer: UPSC's official GS Paper I (2023, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 1 Oct 2026 (how we verify). Permalink · Report an error

Answer: (c) Statement-I is correct but Statement-II is incorrect

Switzerland is one of the world's main centres for refining and trading gold, so it ranks among the leading gold exporters by value. But it is far from having the second largest gold reserves: the Swiss National Bank holds 1,040 tonnes, several times less than the United States and Germany.

• ✓ Statement-I Switzerland refines and trades most of the world's gold, and it was the largest exporter of unwrought non-monetary gold by value in 2022 (about US$90 billion, ahead of the United States and the UAE), according to World Bank WITS trade data.
• ✗ Statement-II The Swiss National Bank holds 1,040 tonnes. The Deutsche Bundesbank states that Germany holds the second largest gold reserve in the world after the United States, so Switzerland is not second.

Remember · Switzerland is a gold refining and trading hub, hence a leading exporter by value, but its own official reserve (1,040 tonnes) is far below the top holders, the USA and Germany.

Question and answer: UPSC's official GS Paper I (2023, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error

Answer: (d) Statement-I is incorrect but Statement-II is correct

Statement-I is wrong: India's share of world merchandise (goods) exports in 2022 was 1.8%, not 3.2%. Statement-II is correct: both Indian and foreign firms have been approved for incentives under the Production-Linked Incentive (PLI) scheme.

• ✗ Statement-I The WTO's World Trade Statistical Review 2023 ranks India 18th among merchandise exporters in 2022, with exports of about US$ 453 billion, a 1.8% share of world exports. The figure of 3.2% does not match.
• ✓ Statement-II The PLI scheme for large-scale electronics manufacturing drew foreign players such as Foxconn, Samsung, Pegatron and Wistron, and domestic firms such as Lava, Micromax, Optiemus and Padget Electronics.

Remember · India's share of world goods exports in 2022 was 1.8% (18th largest exporter, WTO). PLI incentives have gone to both domestic and global manufacturers.

Question and answer: UPSC's official GS Paper I (2023, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error