Question

What are the benefits associated with India- Japan Bilateral Swap Agreement?
1. Enhance the RBI’s ability to manage exchange rate volatility.
2. Prospects of Indian companies would improve in tapping foreign capital.
3. The value of INR will be pegged with respect to Yen.
Select the correct answer using the codes given below:

भारत- जापान द्विपक्षीय विनिमय समझौते से जुड़े लाभ क्या हैं?
1. विनिमय दर की अस्थिरता को प्रबंधित करने की RBI की क्षमता को बढ़ाना।
2. विदेशी पूंजी के दोहन में भारतीय कंपनियों की संभावनाओं में सुधार होगा।
3. येन के संबंध में INR के मूल्य को आंका जाएगा।
नीचे दिए गए कूट का उपयोग करके सही उत्तर चुनें:

• A. Only 1 and 2
  
  केवल 1 और 2
• B. Only 2 and 3
  
  केवल 2 और 3
• C. Only 1 and 3
  
  केवल 1 और 3
• D. All of the above
  
  उपरोक्त सभी

Answer 1

The correct option is A Only 1 and 2


केवल 1 और 2
The Union Cabinet chaired by Prime Minister Shri Narendra Modi has approved the proposal for entering into an Agreement for Bilateral Swap Arrangement (BSA) between India and Japan and authorizing the Reserve Bank of India (RBI) to sign the Agreement for Bilateral Swap Arrangement between the RBI and the Bank of Japan for a maximum amount of USD 75 billion.

The BSA is a very good example of mutual cooperation between India and Japan for strategic objective of assisting each other in times of difficulty and for restoring international confidence. This facility will enable the agreed amount of Capital being available to India on tap for use. Also, with this arrangement in place, prospects of Indian companies would improve in tapping foreign capital as there would be greater confidence in stability of country’s exchange rate. Availability of such swap line to tide over difficulties arising out of Balance of Payment (BOP) would deter speculative attacks on the domestic currency and greatly enhance the RBI’s ability to manage exchange rate volatility.

There is no such provision in the agreement for pegging of currencies. Hence third statement is wrong.