Being well-read is necessary to boost up your confidence, which is necessary for one to gain the attention of the moderator.
Having the knowledge and facts of the world could help you relate any answer to what is going on around the world.
When one aspires to take admission in a business school, the major objective is to gain knowledge about the business world, so knowing some of these facts already shows your interest in the subject and builds trust.
General Knowledge shows your perspective and the eye with which you see the world. This helps the interviewer understand your vision and mindset and this could help you drive the interview in your direction.
The knowledge of current affairs also helps in tackling such questions during the Personal Interview round and helps in giving a strong first impression to the interviewer. It shows that the candidate is well-read and aware of the events around him.