Passage
The Global Financial Stability Report finds that the share of portfolio investments from advanced economies in the total debt and equity investments in emerging economies has doubled in the past decade to 12 percent. The phenomenon has implications for Indian policy makers as foreign portfolio investments in the debt and equity markets have been on the rise. The phenomenon is also flagged as a threat that could compromise global financial stability in a chain reaction, in the event of United States Federal Reserve’s imminent reversal of its “Quantitative Easing” policy.
Which among the following is the most rational and critical inference that can be made from the above passage?
Foreign portfolio investments are not good for emerging economies
Advanced economies undermine the global financial stability
India should desist from accepting foreign portfolio investments in the future
Emerging economies are at a risk of shock from advanced economies
The passage asks for the most rational and critical inference from the passage. (a) is wrong as it just portrays one part of the passage. The portfolio investments have both the good and bad effects. (b) is wrong as the passage suggests threat from the portfolio investments. It cannot be stated from the passage that Advanced economies will always undermine the global financial stability. There are a lot of other external factors working simultaneously. For similar reasons (c) is wrong. (d) is the most rational and critical inference as portfolio investments definitely impacts emerging economies in certain cases so there is a risk.
Hence, Option D is the answer.
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