Economy
2016
External Sector
Balance of Payments
Forex Reserves
Which of the following best describes the term ‘import cover’, sometimes seen in the news?
B.It is the total value of imports of a country in a year
D.It is the number of months of imports that could be paid for by a country’s international reserves
C.It is the ratio between the value of exports and that of imports between two countries
A.It is the ratio of value of imports to the Gross Domestic Product of a country
Correct Answer: Option D
Import Cover indicates the number of months a country can finance its imports using its foreign exchange reserves.
A higher import cover provides a buffer against Balance of Payments (BoP) crises, enabling proactive measures.
For example, India's import cover is approximately 12 months (as of the source article).
Therefore, option d is the correct definition of 'import cover'.
Sources:
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