Question map
Consider the following statements : Statement-I : Switzerland is one of the leading exporters of gold in terms of value. Statement-II : Switzerland has the second largest gold reserves in the world. Which one of the following is correct in respect of the above statements?
Explanation
The correct answer is Option 3 because Statement-I is factually accurate, while Statement-II is incorrect.
- Statement-I is correct: Switzerland is consistently among the world's leading exporters of gold by value. This dominance is not due to domestic mining, but because Switzerland is a global hub for gold refining and transit. It imports raw gold and scrap from across the world, refines it to high purity standards, and re-exporters it.
- Statement-II is incorrect: Switzerland does not hold the second-largest gold reserves in the world. According to official data from the World Gold Council, the United States holds the largest gold reserves, followed by countries like Germany, Italy, and France. Switzerland typically ranks within the top ten globally, but it is far from the second position.
Since the first statement is true and the second is false, Option 3 is the only logically sound choice.
PROVENANCE & STUDY PATTERN
Full viewThis is a classic 'Trade Hub vs. Resource Holder' trap. UPSC tests if you can distinguish between a country that *processes* a commodity (Switzerland refines gold) and one that *hoards* it (USA/Germany hold reserves). Don't memorize top 10 lists blindly; understand the economic function of the country.
This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.
- Passage lists the leading gold exporting countries and places Switzerland first.
- Gives Switzerland's export value and share, indicating it is the top exporter.
- Tabular entry shows Switzerland at rank 1 in gold export data.
- Provides an associated export value for Switzerland, supporting its top position.
- Explicitly states Switzerland is the largest gold exporter in the world.
- Gives an export value for Switzerland (for 2021), reinforcing the ranking claim.
- Explicitly states Switzerland's rank and the tonnage in the central bank reserves ranking.
- Refers to the end-2024 central bank gold reserves context, giving a direct figure and placement.
- Gives the official central bank ranking and the same tonnage (1,040 tonnes).
- Notes the rank as 8th overall but clarifies it is 7th excluding the IMF, supporting the 1,040-tonne figure and explaining ranking nuance.
- Provides historical context and confirms the SNB's current total gold holdings as 1,040 tonnes.
- Supports the tonnage figure cited in ranking passages.
Gives an explicit data point for a country's official gold reserves (India ≈491 tonnes), showing reserves are reported in tonnes and used for cross-country comparison.
A student can use this known value as a benchmark and compare it with external lists (e.g., IMF or World Gold Council tables) to see whether Switzerland's reserves are larger or smaller and thus estimate Switzerland's rank.
Explains that SDRs and official reserve assets are components of a country's official reserves and that such reserves can be exchanged for hard currencies—context for what 'official gold reserves' means in reserve accounting.
A student can combine this definition with published official reserve data sources (IMF/central bank) to understand how gold figures appear in national reserve reports and therefore where Switzerland would be listed.
Shows the book uses country rankings for resource quantities (example: India ranked fourth in iron ore production), illustrating the common practice of ranking countries by resource tonnages.
A student can apply the same approach—consult ranked tables of official gold reserves and place Switzerland relative to other countries using tonnes as the metric.
Provides an example of an international comparison table that lists countries, numeric metrics, and explicit ranks, demonstrating the format for comparing nations by a quantitative measure.
A student could look for a similarly structured table for gold reserves (e.g., from IMF/World Gold Council) and read off Switzerland's rank and tonnes directly.
- [THE VERDICT]: Bouncer. Statement I is intuitive for anyone following economic news (Swiss gold refining), but Statement II requires precise knowledge of the Global Gold Reserve hierarchy (USA > Germany > IMF > Italy).
- [THE CONCEPTUAL TRIGGER]: Global Resource Distribution vs. International Trade. The distinction between 'Flow' (Exports/Imports) and 'Stock' (Central Bank Reserves).
- [THE HORIZONTAL EXPANSION]: Memorize the 'Gold Trinity': 1. Top Reserves: USA (~8,133t) > Germany > IMF > Italy > France. (Switzerland is ~7th). 2. Top Producers (Mining): China > Australia > Russia. 3. Top Consumers: China > India. 4. Top Exporters (Value): Switzerland (Refining hub).
- [THE STRATEGIC METACOGNITION]: Apply the 'Middleman Logic'. Small nations (Switzerland, Singapore, UAE, Belgium) often top export lists for commodities they don't mine (Gold, Oil, Diamonds) because they are processing hubs. Never assume high exports = high natural reserves.
Non-monetary gold transactions are recorded in the balance of trade, while monetary gold is accounted under foreign exchange reserves.
High-yield for UPSC: understanding this distinction is essential to interpret trade statistics and reserve movements correctly. It links international finance, balance of payments accounting, and policy responses to gold flows, enabling answers on how gold trade affects current account and reserves.
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > 2.1. Balance of Visibles or Balance of Trade (BOT) > p. 472
Rankings by export value rely on visible trade (merchandise) figures; balance of trade includes only these visible items while the current account adds invisibles.
Mastering this clarifies what export rankings represent and prevents misinterpretation of trade data. It connects to topics on balance of payments, trade policy, and economic indicators, and helps answer questions on trade composition and country comparisons.
- Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 12: Transport, Communications and Trade > BALANCE OF TRADE AND BALANCE OF PAYMENT > p. 51
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > 2.1. Balance of Visibles or Balance of Trade (BOT) > p. 472
A country's gold export/import position depends on both international trade in gold and its domestic gold production and deposits.
Useful for linking geography and economics: shows why resource distribution affects trade balances and export rankings. It aids in answering questions on trade dependence, resource endowments, and reasons behind import vs export behavior for commodities like gold.
- Environment and Ecology, Majid Hussain (Access publishing 3rd ed.) > Chapter 9: Distribution of World Natural Resources > gold > p. 34
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 17: India’s Foreign Exchange and Foreign Trade > India's Foreign Trade in Recent Years > p. 503
Quantities of mined resources and metal reserves are expressed in tonnes as the standard unit for national resource accounting.
High-yield for geography and resource-management questions because comparing reserves between regions or countries requires correct unit understanding and conversions. Connects to mining policy, resource distribution, and trade statistics; enables answering questions that ask for magnitude comparisons or per-capita resource measures.
- Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 7: Resources > Natural Resources of India > p. 20
- Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 7: Resources > Natural Resources of India > p. 8
A country's official reserves include physical gold holdings as well as financial reserve instruments like SDRs, which play different roles in external stability.
Essential for Indian polity/economy and international finance topics; helps distinguish physical asset questions (tonnes of gold) from convertible/paper assets (SDRs), and is useful for questions on balance of payments, IMF relations, and reserve management strategies.
- Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 7: Resources > Natural Resources of India > p. 20
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 13: International Organizations > 1 SDR = 0.434 US Dollar + 0.293 Euro + 0.123 Yuan + 0.076 Yen + 0.074 Pound > p. 398
Geological surveys, mining bureaus and official statistical yearbooks are the principal reporters of mineral reserve and production figures.
Important for verifying and interpreting quantitative claims in geography and economy papers; knowing data sources helps evaluate reliability of rankings and numerical comparisons and supports evidence-based answers in mains and interview stages.
- Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 7: Resources > Natural Resources of India > p. 8
- Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 7: Resources > Table 7.5 > p. 13
The 'Diamond Paradox': India is the world's largest exporter of Cut & Polished Diamonds (by volume/value share), yet India has negligible diamond reserves (Russia/Botswana hold those). Expect a similar statement swapping Switzerland/Gold with India/Diamonds.
Use the 'Post-WWII Hegemony' logic. Gold reserves are historical accumulations from the Bretton Woods era. It is geopolitically illogical for Switzerland (a small neutral economy) to hold more gold than Germany (Europe's engine) or the IMF. The 'Second Largest' tag usually belongs to a major economic power.
Link to GS-3 (Economy - External Sector): Switzerland's model is 'Value Addition'. They import raw dore bars, refine to 99.99% purity, and export. This is relevant to India's 'GIFT City' International Bullion Exchange (IIBX) ambition to become a price-setter, not just a price-taker.