Indian Economy › External Sector & Balance Of Payments – UPSC Prelims PYQs

With reference to the Indian economy, consider the following statements :

1. An increase in Nominal Effective Exchange Rate (NEER) indicates the appreciation of rupee.
2. An increase in the Real Effective Exchange Rate (REER) indicates an improvement in trade competitiveness.
3. An increasing trend in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER.

Which of the above statements are correct ?

With reference to foreign-owned e-commerce firms operating in India, which of the following statements is/are correct ?

1. They can sell their own goods in addition to offering their platforms as market-places.
2. The degree to which they can own big sellers on their platforms is limited.

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Consider the following statements :

1. Tight monetary policy of US Federal Reserve could lead to capital flight.
2. Capital flight may increase the interest cost of firms with existing External Commercial Borrowings (ECBs).
3. Devaluation of domestic currency decreases the currency risk associated with ECBs.

Which of the statements given above are correct ?

Consider the following :

1. Foreign currency convertible bonds
2. Foreign institutional investment with certain conditions
3. Global depository receipts
4. Non-resident external deposits

Which of the above can be included in Foreign Direct Investments?

Consider the following statements : The effect of devaluation of a currency is that it necessarily

1. improves the competitiveness of the domestic exports in the foreign markets
2. increases the foreign value of domestic currency
3. improves the trade balance

Which of the above statements is/are correct?

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

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With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic ?

With reference to the international trade of India at present, which of the following statements is/are correct ?

1. India’s merchandise exports are less than its merchandise imports.
2. India’s imports of iron and steel, chemicals, fertilisers and machinery have decreased in recent years.
3. India’s exports of services are more than its imports of services.
4. India suffers from an overall trade/current account deficit.

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Consider the following statements :

1. Most of India’s external debt is owed by governmental entities.
2. All of India’s external debt is denominated in US dollars.

Which of the statements given above is/are correct?

In the context of India, which of the following factors is/are contributor/contributors to reducing the risk of a currency crisis?

1. The foreign currency earnings of India’s IT sector
2. Increasing the government expenditure
3. Remittances from Indians abroad

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Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?

Which of the following best describes the term 'import cover', sometimes seen in the news?

Convertibility of rupee implies

The problem of international liquidity is related to the non-availability of

With reference to Balance of Payments, which of the following constitutes/constitute the Current Account?

1. Balance of trade
2. Foreign assets
3. Balance of invisibles
4. Special Drawing Rights

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The balance of payments of a country is a systematic record of

Which of the following constitute Capital Account?

1. Foreign Loans
2. Foreign Direct Investment
3. Private Remittances
4. Portfolio Investment

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Which one of the following groups of items is included in India’s foreign-exchange reserves?

Which of the following would include Foreign Direct Investment in India?

1. Subsidiaries of foreign companies in India
2. Majority foreign equity holding in Indian companies
3. Companies exclusively financed by foreign companies
4. Portfolio investment

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Consider the following statements : The price of any currency in international market is decided by the

1. World Bank
2. demand for goods/services provided by the country concerned
3. stability of the government of the concerned country
4. economic potential of the country in question

Which of the statements given above are correct?

In terms of economy, the visit by foreign nationals to witness the XIX Commonwealth Games in India amounted to

Consider the following actions which the Government can take:

1. Devaluing the domestic currency.
2. Reduction in the export subsidy.
3. Adopting suitable policies which attract greater FDI and more funds from FIIs.

Which of the above actions can help in reducing the current account deficit?

Both Foreign Direct Investment (FDI) and Foreign Institutional Investor (FII) are related to investment in a country.

Which one of the following statements best represents an important difference between the two?

A great deal of Foreign Direct Investment (FDI) to India comes from Mauritius than from many major and mature economies like UK and France. Why?

Tarapur Committee was associated with which one of the following?

Assertion (A): ‘Balance of Payments’ represents a better picture of a country’s economic transactions with the rest of the world than the ‘Balance of Trade’.

Reason (R): ‘Balance of Payments’ takes into account the exchanges of both visible and invisible items whereas ‘Balance of Trade’ does not.

Consider the following statements:

1. In India, during the financial year 2004-2005 an increase of below 10 % over the value of exports (in rupee terms) in the financial year 2003-2004 was reported.
2. According to the WTO, India’s share in the world merchandise exports is 2 % in the year 2005.

Which of the statements given above is/are correct?

Consider the following statements :

1. During the year 2004, India’s foreign exchange reserves did not exceed the 125 billion U.S. Dollar mark
2. The series of index numbers of wholesale prices introduced from April, 2000 has the year 1993-94 as base year.

Which of the statements given above is/are correct?

In the last one decade, which one among the following sectors has attracted the highest Foreign Direct Investment inflows into India?

Assertion (A): For the first time, India had no trade deficit in the year 2002-03.

Reason (R): For the first time, India's exports crossed worth $50 billion in the year 2002-03.

Which one of the following statements is correct with reference to FEMA in India?

With reference to Government of India’s decisions regarding Foreign Direct Investment (FDI) during the year 2001-02, consider the following statements:

1. Out of the 100% FDI allowed by India in tea sector, the foreign firm would have to disinvest 33% of the equity in favour of an Indian partner within four years.
2. Regarding the FDI in print media in India, the single largest Indian shareholder should have a holding higher than 26%.

Which of these statements is/are correct?

Assertion (A): During the year 2001-02, the value of India’s total exports declined, registering a negative growth of 2.17%.

Reason (R): During the year 2001-02, negative growth in exports was witnessed in respect of iron and steel, coffee, textiles and marine products.

India's external debt increased from US $98,158 million as at the end of March 2000 to US $100,225 million as at the end of March 2001 due to increase in

Global capital flows to developing countries increased significantly during the nineties. In view of the East Asian financial crisis and the Latin American experience, which type of inflow is considered safest for the host country?

A country is said to be in debt trap if

Consider the following statements: Full convertibility of the rupee may mean

1. Its free float with other international currencies.
2. Its direct exchange with any other international currency at any prescribed place inside and outside the country.
3. It acts just like any other international currency.

Which of these statements are correct?

Assertion (A): Ceiling on foreign exchange for a host of current account transaction heads was lowered in the year 2000. Reason (R): There was a fall in foreign currency assets also.

The largest share of Foreign Direct Investment (1997-2000) went to

Consider the following statements: The Indian rupee is fully convertible

I. In respect of Current Account of Balance of Payment. II. In respect of Capital Account of Balance of Payment. III. Into gold.

Which of these statements is/are correct?

Assertion (A): The rate of growth of India’s exports has shown an appreciable increase after 1991.

Reason (R): The Government of India has resorted to devaluation.

Assertion (A): Devaluation of a currency may promote export.

Reason (R): Price of the country's products in the international market may fall due to devaluation.

Consider the following statements: The price of any currency in the international market is decided by the I. World Bank II. Demand for goods/services provided by the country concerned III. Stability of the government of the concerned country IV. Economic potential of the country in question Of these statements:

Which one of the following is the correct sequence of decreasing order of the given currencies in terms of their value in Indian Rupees?

Capital Account Convertibility of the Indian Rupee implies

One of the important goals of the economic liberalisation policy is to achieve full convertibility of the Indian rupee. This is being advocated because

Hawala transactions relate to payments

The changing composition of the export trade is indicative of structural transformation of Indian economy in favour of modernisation. The best indicator of the trend is the

Which of the following pairs are correctly matched? I. Increase in foreign exchange reserves ................. Monetary expansion II. Low import growth rate in India ...................... Recession in Indian Industry III. Euro issues ................ Shares held by Indian companies in European countries IV. Portfolio investment ............... Foreign institutional investors

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