gs1medium
Which of the following best describes the term ‘import cover’, sometimes seen in the news?
- A.It is the ratio of value of imports to the Gross Domestic Product of a country.
- B.It is the total value of imports of a country in a year.
- C.It is the ratio between the value of exports and that of imports between two countries.
- D.It is the number of months of imports that could be paid for by a country’s international reserves.
▶ Answer & Explanation
Correct answer: D. It is the number of months of imports that could be paid for by a country’s international reserves.
Import cover measures a country's ability to meet its import payments using its foreign exchange reserves. It is calculated by dividing the total value of international reserves by the average daily or monthly value of imports. A higher import cover indicates greater financial stability and resilience against external shocks, suggesting the country can sustain its imports for a longer period even if export earnings decline.
Source: UPSC gs1 2016