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

Q: What is UPSC Prelims?

UPSC Prelims is a competitive examination conducted in India. This question is from the 2020 UPSC Prelims Economy paper.

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To prepare for UPSC Prelims Economy, practice previous year questions (PYQs), understand concepts thoroughly, and solve mock tests regularly. This 2020 question covers Balance of Payment, Current Account & Trade Deficit topic.

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This UPSC Prelims 2020 Economy question has a medium difficulty level and is marked as an important question.

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Question

With reference to the international trade of India at present, which of the following statements is/are correct?India's merchandise exports are less than its merchandise imports.India's imports of iron and steel, chemicals, fertilisers and machinery have decreased in recent years.India's exports of services are more than its imports of services.India suffers from an overall trade/current account deficit.Select the correct answer using the code given below:

Accepted Answer

Correct Answer: D — 1, 3 and 4 onlyStep-by-step Solution:Statement 1: Correct. India’s merchandise imports exceed exports, leading to a merchandise trade deficit. ✗ (actually ✓ — see below). Correction: The statement says “exports are less than imports”, which is correct – India has a trade deficit in goods. ✓Statement 2: Incorrect. Imports of iron & steel, chemicals, fertilisers, and machinery have increased in recent years (in value and share) due to industrial demand. ✗Statement 3: Correct. India’s services exports (IT, software, business services) exceed services imports, giving a services surplus. ✓Statement 4: Correct. Despite a services surplus, the large merchandise deficit leads to an overall current account deficit (CAD) in most years (though it turned to surplus in 2020-21 due to COVID‑19). ✓Why other options are incorrect:Option A (1 and 2): Statement 2 false.Option B (2 and 4): Statement 2 false.Option C (3 only): Statements 1 and 4 also correct.Key Concept: India’s major exports: petroleum products, gems & jewellery, pharmaceuticals, machinery, textiles. Major imports: crude oil, gold, electronics, machinery, chemicals. The services surplus (especially software) offsets part of the merchandise deficit.

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