Directions (1-9) : Read the following passage carefully and answer the questions given below it. Certain words have been given in bold to help you locate them, while answering some of the questions.
The Fed has raised its benchmark interest rate again by a whopping 0.75%. The Reserve Bank of India has also been forced to raise interest rates further but also take other steps. These decisions in the Monetary Policy Committee (MPC) meeting are based on what the members of the MPC see as the likely course of the economy in the months ahead. But, the trajectory of the world economy, and its likely impact on the Indian economy, is imponderable. So, Indian policymakers would face two crucial problems. First, the main uncertainty is due to Russia’s war on Ukraine and the resultant economic sanctions on Russia, as well as the zero-COVID-19 policy in China that repeatedly implements lockdowns leading to global supply bottlenecks. Second, policy has to base itself on data. If it is deficient, it introduces additional uncertainty, making projections for the future difficult and causing policies to fail. This will _______ the problem that results from the global uncertainty.
Since early 2020, the SARS-COV-2 virus has caused global uncertainty. Waves of COVID-19 have curtailed human activity with a consequent loss of production. Different countries have implemented lockdowns of varying severity leading to supply bottlenecks. In a globalised interdependent world, production was hit resulting in price rise (inflation) and loss of real incomes. This has resulted in decline in demand and, in a vicious cycle, a further slowing down of the economy. Predicting these declines has been difficult because forecasting when another wave would strike and how much disruption would occur has been difficult. As prices have risen globally and economies slowed down, many countries have faced stagflation. The uncertainty due to the novel coronavirus has declined in spite of waves of attack persisting because the impact of new virus mutants of the virus is milder and there is also immunity due to vaccination. Countries are not implementing lockdowns so vigorously now, in turn reducing adverse economic impact.
However, China is an exception with its zero-COVID policy. It has been implementing strict lockdowns in the last six months, even when only a few cases of the disease have been detected. Since China is now the manufacturing hub of the world, any disruption impacts supply globally and causes bottlenecks to persist. There is another issue now. Monkeypox virus has suddenly emerged and spread rapidly in the last few months to more than 80 countries where it is not endemic. The World Health Organization seems to be confident that this threat can be dealt with more easily than COVID-19. Yet, there is heightened concern and uncertainty.