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Q14 (IAS/2016) Economy › External Sector & Trade › International Monetary Fund Official Key

Recently, which one of the following currencies has been proposed to be added to the basket of IMF's SDR?

Result
Your answer: —  Âˇ  Correct: D

Explanation

The correct answer is option D (Renminbi). On November 30, 2015, the IMF executive board announced its decision to incorporate the renminbi into the basket of currencies that comprise the IMF's special drawing rights (SDR), taking effect October 1, 2016.[3] This decision was made just before the 2016 exam and was a significant development in international finance. Chinese Renminbi was included in the SDR basket in 2016.[4] Currently, the SDR basket consists of the U.S. dollar, euro, Japanese yen, pound sterling and the Chinese Renminbi (RMB)/Yuan.[5] The other currencies mentioned - Rouble, Rand, and Indian Rupee - were not proposed for inclusion in the SDR basket during this period. This addition of the Renminbi marked China's growing economic influence and was a historic change to the SDR composition.

Sources
  1. [1] https://www.frbsf.org/wp-content/uploads/Prasad-AEPC-2015.pdf
  2. [2] https://www.frbsf.org/wp-content/uploads/Prasad-AEPC-2015.pdf
  3. [3] https://www.frbsf.org/wp-content/uploads/Prasad-AEPC-2015.pdf
  4. [4] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > Recent Reforms undertaken by IMF > p. 521
  5. [5] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 13: International Organizations > Special Drawing Rights (SDR): > p. 398
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PROVENANCE & STUDY PATTERN

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Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.
Q. Recently, which one of the following currencies has been proposed to be added to the basket of IMF's SDR? [A] Rouble [B] Rand [C] Indi…
At a glance
Origin: Books + Current Affairs Fairness: Low / Borderline fairness Books / CA: 2.5/10 ¡ 5/10
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This is a textbook example of 'Headline Current Affairs' merging with 'Static Economy'. The inclusion of the Renminbi was a historic shift in the global financial order, making this a high-fairness, must-know question for any serious aspirant.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
In 2016, was the Indian Rupee proposed to be added to the IMF's Special Drawing Rights (SDR) basket?
Origin: Web / Current Affairs Fairness: CA heavy Web-answerable

Web source
Presence: 5/5
"On November 30, 2015, the IMF executive board announced its decision to incorporate the renminbi into the basket of currencies that comprise the IMF’s special drawing rights (SDR), taking effect October 1, 2016."
Why this source?
  • Explicitly states the IMF decided to incorporate the renminbi (RMB) into the SDR basket, effective October 1, 2016.
  • Passage names RMB as the currency added in 2016, not the Indian rupee, implying the 2016 addition was RMB.
Web source
Presence: 5/5
"We welcome the inclusion of the RMB into the Special Drawing Rights (SDR) currency basket on 1October, 2016."
Why this source?
  • Declares: 'We welcome the inclusion of the RMB into the Special Drawing Rights (SDR) currency basket on 1October, 2016.'
  • Confirms RMB inclusion in 2016, and does not mention any proposal to add the Indian rupee in that context.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > SPECIAL DRAWING RIGHTS > p. 515
Strength: 5/5
“International Economic Institutions This basket is reviewed after every 5 years. CONTRACT • The value of SDRs keeps changing due to continuous fluctuations in exchange rates (SDR was US$ 1.44 on 25 January 2021). • Unlike other currencies, SDR is not traded in forex market. • Criterion for inclusion of a currency in the SDR basket: • Export Criterion • " Issuer of the currency must be an IMF member/monetary union which has IMF members, and • " It should also be among the largest exporters of the world. However, it is difficult to make SDR so strong that it may replace US dollar as global reserve currency because the United States enjoys the maximum voting rights (17.46%) in the affairs of IMF.”
Why relevant

States the SDR basket is reviewed every 5 years and gives the formal criterion for inclusion (issuer must be an IMF member/monetary union and among the largest exporters).

How to extend

A student could check the timing of the five‑year reviews (e.g., 2010, 2015/2016, 2020) and compare India's export rank and IMF membership in 2016 to assess likelihood of a proposal.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 17: India’s Foreign Exchange and Foreign Trade > INTERNATIONALISATION OF RUPEE > p. 500
Strength: 4/5
“Indian rupee will be termed as 'internationalised' if: • Banks, firms and residents of another country start holding it for financial security.• It is accepted in international trade transactions. • Non-residents are eager to invest in rupee-denominated assets, etc. Pre-requisites of internationalisation of any currency include: • 1. Sufficiency in the availability of that currency. • 2. Stability of that currency. • 3. Liquidity of that currency. Presently, US Dollar, Euro, Pound Sterling, Yen and Renminbi may be termed 'international currencies'. Nepal or Bhutan hold India rupee along with their own official currencies (Nepalese Rupee and Bhutanese Ngultrum, respectively) for financial security and for cross-border trade.”
Why relevant

Lists pre‑requisites for a currency to be 'internationalised' — sufficiency, stability and liquidity — which are practical conditions related to SDR suitability.

How to extend

One could evaluate whether the rupee met these practical preconditions around 2016 using external facts (reserves, convertibility, market liquidity) to judge if a proposal was plausible.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > SPECIAL DRAWING RIGHTS > p. 514
Strength: 4/5
“• IMF lends to member countries in its artificial currency unit known as Special Drawing Rights \bullet (SDRs). • Created in 1969, SDRs are the foreign exchange reserve assets under IMF. • SDR is not intrinsically a currency but is a unit of account maintained by IMF. ٠ • It is neither a proper currency nor a claim on IMF. \bullet • Its value is based on the basket of the following five major currencies: • 1. US Dollar 41.73 per cent • 2. Euro 30.93 per cent • 3. Chinese Renminbi 10”
Why relevant

Shows the SDR basket composition (five major currencies) and indicates the SDR is based on a basket of major currencies rather than many small ones.

How to extend

A student could compare India's currency status in 2016 with the currencies already present (e.g., size, global use) to infer how plausible an SDR addition would be.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 13: International Organizations > Special Drawing Rights (SDR): > p. 398
Strength: 3/5
“The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries' official reserves in the context of the Bretton Woods fixed exchange rate system. The value of the SDR was initially defined as equivalent to 0.888671 grams of fine gold—which, at the time, was also equivalent to one U.S. dollar. After the collapse of the Bretton Woods system in 1973, the SDR was redefined as a basket of currencies. Currently, the SDR basket consists of the U.S. dollar, euro, Japanese yen, pound sterling and the Chinese Renminbi (RMB)/Yuan.”
Why relevant

Explains SDR history and confirms the current basket contains the dollar, euro, yen, pound and renminbi — implying the SDR can and has been adjusted to include major emerging currencies (e.g., RMB).

How to extend

Using the example of RMB inclusion, one could research when that change occurred and whether similar conditions applied to the rupee around 2016 to evaluate if a proposal was likely then.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 13: International Organizations > India and IMF > p. 399
Strength: 3/5
“• India is a founder member of IMF• RBI adopted Special Data Dissemination Standards (SDDS) of IMF• As per our commitment, India adopted current account convertibility in 1994• Methodology of National Income Accounting was changed (to Market Prices) in 2015• IMF's regional training institute is in Delhi to provide training to government officials• India is a net lender to IMF”
Why relevant

Notes India's standing with the IMF (founder member, adoption of IMF standards), indicating India had the institutional relationship required by the inclusion criterion.

How to extend

Combine this institutional fact with export and currency metrics from 2016 to determine if India met formal and practical conditions for a rupee SDR proposal.

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