UPSC Prelims 2013·CSAT·Reading Comprehension·Passage Comprehension

Read the following passage and answer the items that follow. Your answers to these items should be based on the passage only. Financial markets in India have acquired greater depth and liquidity over the years. Steady reforms since 1991 have led to growing linkages and integration of the Indian economy and its financial system with the global economy. Weak global economic prospects and continuing uncertainties in the international financial markets, therefore, have had their impact on the emerging market economies. Sovereign risk concerns, particularly in the Euro area, affected financial markets for the greater part of the year, with the contagion of Greece's sovereign debt problem spreading to India and other economies by way of higher-than-normal levels of volatility. The funding constraints in international financial markets could impact both the availability and cost of foreign funding for banks and corporates. Since the Indian financial system is bank dominated, banks' ability to withstand stress is critical to overall financial stability. Indian banks, however, remain robust, notwithstanding a decline in capital to risk-weighted assets ratio and a rise in non-performing asset levels in the recent past. Capital adequacy levels remain above the regulatory requirements. The financial market infrastructure continues to function without any major disruption. With further globalization, consolidation, deregulation, and diversification of the financial system, the banking business may become more complex and riskier. Issues like risk and liquidity management and enhancing skills therefore assume greater significance. The Indian financial markets are affected by global changes mainly due to the

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  1. Aincreased inflow of remittances from abroad
  2. Benormous increase in the foreign exchange reserves
  3. Cgrowing global linkages and integration of the Indian financial marketsCorrect
  4. Dcontagion of Greece's sovereign debt problem.

Explanation

The passage states, "Steady reforms since 1991 have led to growing linkages and integration of the Indian economy and its financial system with the global economy." This directly identifies the reason for global changes affecting Indian financial markets. A) increased inflow of remittances from abroad: The passage does not mention remittances. B) enormous increase in the foreign exchange reserves: The passage does not mention foreign exchange reserves. C) growing global linkages and integration of the Indian financial markets: This is explicitly stated in the passage as the reason for the impact of global events. D) contagion of Greece's sovereign debt problem: This is cited as a specific example of a global event affecting India, but it is a *result* or *manifestation* of the growing global linkages, not the underlying general reason why India is affected by global changes. Therefore, C is the correct answer as it directly reflects the reason given in the passage.
Reading Comprehension: Read the following passage and answer the items that follow. Your answers to these items should be based on the passage
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