Question 1

Which of the following is included in the Current Account of Balance of Payments?

Accepted Answer

The Current Account of Balance of Payments includes trade in goods (visible trade), trade in services (invisible trade), income (primary income like remittances and investment income), and current transfers. Capital transfers and financial investments are part of the Capital and Financial Account, not the Current Account.

Question 2

Which of the following is the correct definition of 'Balance of Trade' in international economics?

Accepted Answer

Balance of Trade (BoT) is the difference between the value of a country's exports and imports of goods only, excluding services. It is a component of the broader Balance of Payments account. India's BoT is calculated by subtracting total imports of merchandise from total exports of merchandise. For example, if India exports goods worth $300 billion and imports goods worth $350 billion, the BoT would be a deficit of $50 billion. This is distinct from Balance of Payments, which includes both goods and services trade, income flows, and capital transfers.

Question 3

Which of the following best describes the 'Current Account' component of India's Balance of Payments?

Accepted Answer

The Current Account of the Balance of Payments records all transactions related to the exchange of goods, services, income, and unilateral transfers between a country and the rest of the world. It includes exports and imports of merchandise, services (like IT services, tourism), income flows (dividends, interest), and transfers (remittances, grants). India's Current Account deficit or surplus is a key macroeconomic indicator. A deficit means India is importing more than it exports and receiving net inflows of capital. Option B correctly defines the Current Account scope. Option A incorrectly limits it to only merchandise trade, ignoring services and income. Option C confuses the Current Account with the Capital Account (which records investment flows and asset purchases). Option D is too narrow and misses the comprehensive nature of current transactions.

Question 4

India's merchandise trade deficit in FY 2023-24 was primarily driven by a significant gap between imports and exports. Which of the following correctly identifies the main commodity category that contributed most to this deficit?

Accepted Answer

India's merchandise trade deficit in FY 2023-24 (April 2023 – March 2024) was approximately USD 85-90 billion. The primary driver was petroleum, oil and lubricants (POL), which accounted for the largest share of imports relative to exports. India imported crude oil and petroleum products worth over USD 100 billion while exporting minimal petroleum products, creating a structural deficit in this category. This is a persistent feature of India's balance of payments due to India's dependence on imported crude oil for meeting domestic energy demand. Other significant deficit contributors included coal and electronic goods, but POL remained the largest single commodity deficit. Therefore, the answer is B.

RRB Group D Trade & Balance of Payments

RRB Group D Trade & Balance of Payments — Past Exam Questions

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