[Mission 2022] QUIZ – 2021: Insights Current Affairs Quiz , 9 May 2022

Solution: b)

Eight months after hitting a record high of $642.45 billion in September 2021, India’s foreign exchange reserves have now fallen below the $600 billion mark amid capital outflows and strengthening dollar.

The decline was on account of a fall in foreign currency assets (FCAs), a major component of the overall reserves. The foreign currency assets also include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the reserves.

A major reason for the decline in forex reserves is capital outflows by foreign portfolio investors (FPIs) who pulled out $ 21.43 billion since September 2021.

The demand for dollars also remained high as the Russia-Ukraine war led to a spike in oil and commodity prices, apart from depreciation of other currencies.

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Solution: a)

The valuation loss, reflecting the appreciation of the US dollar against major currencies, and decline in gold prices have also played a part in the decline in foreign exchange reserves.

If the rupee slides further, the RBI will be forced to intervene in the forex market by selling dollars from its forex kitty, putting pressure on the total forex reserves.

If the RBI gives preference to sustain the forex reserves level, there could be some rupee depreciation in the horizon.

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Solution: c)

Indian Computer Emergency Response Team or Cert-In, a wing of the Ministry of Electronics and Information Technology.

What is a VPN and how do these networks function?

Any and all devices connected to the internet are a part of a large network of computers, servers and other devices spread across the world. To identify each device connected to the internet, service providers globally assign a unique address to each such device called the internet protocol address or IP address. It is this IP address that helps websites, law enforcement agencies and even companies track down individual users and their accurate location.

A virtual private network, when switched on, essentially creates a safe network within the larger global network of the internet and masks the IP address of the user by rerouting the data. Acting as a tunnel, a VPN takes data originating from one server and masks it in a different identity before delivering it to the destination server. In essence, a VPN creates several proxy identities for your data and delivers it safely without disturbing the content of the data.

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Solution: a)

The Central Government operates Small Savings Schemes (SSS) through the nationwide network of about 1.5 lakh post offices, more than 8,000 branches of the Public-Sector Banks and select private sector banks and more than 5 lakh small savings agents.

National Small Savings Fund (NSSF) was established in 1999 within the Public Account of India for pooling the money from different SSSs. Collections from all small savings schemes are credited to the NSSF.

Objective for the formation of a dedicated fund for small savings is to de-link small savings transactions from the Consolidated Fund of India. Since NSSF operates in the Public Account, its transactions do not impact the fiscal deficit of the Centre directly.

Solution: c)

A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment by a notion of direct control. Broadly, foreign direct investment includes “mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations, and intra company loans”. FDI is the sum of equity capital, long-term capital, and short-term capital as shown in the balance of payments.

FDI is largely a matter of commercial business decisions and FDI inflow depends on a host of factors such as availability of natural resource, market size, infrastructure, political and general investment climate as well as macro-economic stability and investment decision of foreign investors.

Non-Resident external deposits are a ‘debt creating’ flow in balance of payments accounts and therefore, not part of Foreign Direct investments.

Non-Resident External (NRE) account is a rupee dominated account opened by an NRI to facilitate deposit of foreign currency earnings.

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