If another global financial crisis happens in the near future, which of the following actions/policies are most likely to give some immunity to India? 1. Not depending on short-term foreign borrowings 2. Opening up to more foreign banks 3. Maintaining full capital account convertibility Select the correct answer using the code given below:

The correct answer is Option 1 (1 only). In the context of a global financial crisis, the following reasoning explains why Statement 1 provides immunity while others increase vulnerability:

• Statement 1 is correct: Short-term foreign borrowings (External Commercial Borrowings) are highly volatile. During a global crisis, foreign lenders often withdraw capital quickly ("flight to safety"), leading to a liquidity crunch and currency depreciation. Reducing dependence on these loans ensures better macro-economic stability.
• Statement 2 is incorrect: Opening up to more foreign banks increases financial contagion. If parent banks in developed nations face a crisis, their Indian subsidiaries may restrict lending or pull out capital, transmitting the global shock directly into the domestic economy.
• Statement 3 is incorrect: Full Capital Account Convertibility allows local and foreign investors to move unlimited money in and out of the country. During a crisis, this could trigger massive capital flight, crashing the Rupee and depleting foreign exchange reserves.

Thus, only cautious debt management (Statement 1) offers a protective buffer against external shocks.