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    Question

    With reference to ‘International Investment Position

    (IIP)’, consider the following statements: 1.India has a negative Net IIP. 2.The Net IIP position determines whether a country is a net creditor or debtor nation by measuring the difference in its external assets and liabilities. 3.India’s international financial assets covered 90% of international financial liabilities as of end September 2022. Which of the statements given above is/are correct?
    A 1 only Correct Answer Incorrect Answer
    B 1 and 2 only Correct Answer Incorrect Answer
    C 1 and 3 only Correct Answer Incorrect Answer
    D 2 only Correct Answer Incorrect Answer
    E 1, 2 and 3 Correct Answer Incorrect Answer

    Solution

    India has a negative IIP. India’s international financial assets covered 68.5% of international financial liabilities as of end September 2022. Hence, statement 1 is correct and statement 3 is incorrect. The International Investment Position (IIP) is a statistical statement that shows at a point in time the value and composition of (a) financial assets of residents of an economy that are claims on non-residents and gold bullion held as reserve assets, and (b) liabilities of residents of an economy to non-residents. The difference between an economy’s external financial assets and liabilities is the economy’s net IIP, which may be positive or negative. Hence, statement 2 is correct.

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