Correct Option (d)
The passage highlights that the significant increase in foreign portfolio investments from advanced economies into emerging economies, including India, poses a risk to global financial stability. Specifically, it cites the potential reversal of the United States Federal Reserve's 'Quantitative Easing' policy as a trigger for a chain reaction that could compromise this stability. This directly implies that emerging economies are susceptible to financial shocks originating from policy shifts in advanced economies.
Incorrect Options:
Option (a): The passage does not assert that foreign portfolio investments are inherently detrimental to emerging economies. Instead, it identifies specific risks associated with their volatility, particularly in the context of policy changes in advanced economies, rather than a blanket condemnation of all FPI.
Option (b): This option presents an overgeneralization. The passage indicates that specific policy decisions by advanced economies, such as the U.S. Federal Reserve's potential reversal of Quantitative Easing, can create financial instability. It does not suggest that advanced economies universally or always undermine global financial stability.
Option (c): The passage acknowledges the rising trend of foreign portfolio investments in India and discusses the associated risks for policymakers. However, it does not advocate for India to completely cease or reject foreign portfolio investments in the future. The focus is on understanding and managing the implications of these investments, not their outright prohibition.