Import Cover - UPSC Economy Concepts and Terms

Import Cover is an important concept in economics for the UPSC IAS exam. An important indicator of the stability of a currency is import cover. This article briefs you about this concept for the civil services exam.

Aspirants would find this article very helpful while preparing for the IAS Exam.

Import Cover Meaning

Import Cover measures the number of months of imports that can be covered with foreign exchange reserves available with the central bank of the country. Eight to ten months of import cover is essential for the stability of a currency.

Candidates can enhance their UPSC exam preparation by attempting UPSC Previous Years Question Papers now!!

To complement your preparation for the upcoming exam, check the following links:

Import Cover India

The importance of building up and being able to sustain a higher import cover had been recognized by India’s policy makers even prior to the 1991 crisis. India had foreign exchange reserves which meant to cover import costs for two years. But, that was just sufficient to cover close to two and half months of imports only, because of crisis. India’s Foreign exchange reserve went up from $ 2.2 billion in 1990-1991 to $20.8 billion in 1994-95. During the currency crisis of 2013, when foreign exchange reserves fell to about $275 billion, import cover declined to about seven months. Presently, country’s foreign exchange reserves, which crossed $360 billion, could cover imports for 10.9 months.

Current import cover of India

As of January 2019, India’s import cover was 9.5 months. It fell from 10.9 in March 2018 because of four reasons chiefly:

  1. Stagnant forex reserves
  2. Weakening value of the rupee
  3. US Fed rates
  4. Lowering of (Foreign Institutional Investment) FII inflows

Candidates can check the relevant links for the preparation of upcoming UPSC Examination-

EXIM Bank – Export-Import Bank of India Plastic Waste Imports To India Go Up Directorate General of Foreign Trade (DGFT)
Undervaluation of Currency Exchange Rate Management Options Money Supply in Economy
Forex Swap: Notes for UPSC Economy Forex reserves, importance, advantages RBI – Reserve Bank of India

UPSC Prelims Question:

Consider the following statements:

  1. Import cover is the number of months of imports that could be covered for by a country’s international reserves.
  2. Import cover is an important indicator of the stability of a currency.

Which of the statements are true?

    1. Only 1
    2. Only 2
    3. Both 1 and 2
    4. None of the above

Answer: C

The above details would help candidates prepare for UPSC 2021.

Frequently Asked Questions on Import Cover

Q1

Q 1. What is an Import Cover?

Ans. Import Cover measures the number of months of imports that can be covered with foreign exchange reserves available with the central bank of the country.
Q2

Q 2. What should be the minimum months of import cover?

Ans. Eight to ten months of import cover is essential for the stability of a currency.

UPSC exam-related preparation materials will be found through the links given below.

Current Affairs Quiz UPSC Syllabus
IAS Salary Static GK
Best Optional Subjects for UPSC 10 Must-Read Books for IAS Aspirants
UPSC Monthly Current Affairs Magazine UPSC Prelims exam
Eligibility Criteria For UPSC UPSC Mains
UPSC Exam Pattern Check Trend Analysis of UPSC Prelims
UPSC Books Daily News Analysis
IAS Exam UPSC Calendar 2021
Pros and Cons of Economics Optional for UPSC Mains Free Economics & Social Issues NCERT Books PDF Download
Important books for Economics optional for UPSC IAS Mains Syllabus of Economics Optional

Aspirants can find complete information about upcoming Government Exams through the linked article.

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