UPSC Prelims Practice Questions — Goods exports jump 23.04% in September

Q1. With reference to the recording of transactions in India's Balance of Payments, consider the following statements: Which of the statements given above is/are correct?

  1. Dividends and interest paid by Indian entities to foreign investors are recorded under primary income in the current account.
  2. Net inflows of foreign direct investment are recorded in the financial account and not in the current account.
  3. Gold imported to meet household jewellery demand is recorded as a merchandise import in the current account.
  • A. 2 and 3 only
  • B. 1 and 2 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q2. India runs a merchandise trade deficit. In a given month, both its merchandise exports and its merchandise imports were higher in US dollar value than in the same month of the previous year. Which one of the following, taken by itself, is sufficient to conclude that the merchandise trade deficit narrowed year-on-year?

  • A. The dollar value of crude oil imports fell over those twelve months
  • B. The dollar increase in exports was larger than the dollar increase in imports
  • C. The rupee depreciated against the US dollar over those twelve months
  • D. The percentage growth of exports was higher than the percentage growth of imports

Q3. In September 2026, India's merchandise exports rose about 23% year-on-year to $44.4 billion and its merchandise imports rose about 8% to $74.61 billion. The merchandise trade deficit narrowed year-on-year, mainly because imports of precious metals fell, although it was wider than in August 2026. Which of the following inferences can validly be drawn from the above?

  1. Merchandise imports other than precious metals, taken together, were higher in value than in September 2025.
  2. India's current account deficit for September 2026 was smaller than in September 2025.
  3. India's merchandise exports in September 2026 were higher in value than in August 2026.
  • A. 2 and 3 only
  • B. 1 and 3 only
  • C. 1 only
  • D. 1 and 2 only

Q4. Suppose international crude oil prices rise sharply because of a conflict in West Asia, while the quantities India trades stay roughly unchanged. Consider the following likely effects on India: Which of the statements given above is/are correct?

  1. India's import bill for crude oil rises.
  2. India's earnings from exports of refined petroleum products tend to rise.
  3. India's merchandise trade balance necessarily improves because India is a net exporter of refined petroleum products.
  • A. 1 and 2 only
  • B. 1, 2 and 3
  • C. 2 and 3 only
  • D. 1 only

Q5. With reference to a country's terms of trade, consider the following statements: Which of the statements given above is/are correct?

  1. The terms of trade are measured as the ratio of the import price index to the export price index.
  2. A country's export earnings can rise even while its terms of trade deteriorate.
  3. A rise in a country's export prices relative to its import prices is regarded as a favourable movement in its terms of trade.
  • A. 2 and 3 only
  • B. 1, 2 and 3
  • C. 1 and 2 only
  • D. 3 only

Q6. With reference to the external sector of an economy with a managed floating exchange rate such as India's, consider the following statements: Which of the statements given above is/are correct?

  1. If the current account deficit exceeds net capital and financial inflows, the shortfall is met by drawing down foreign exchange reserves.
  2. A decline in foreign exchange reserves on a Balance of Payments basis shows that the country ran a current account deficit in that period.
  3. Other things being equal, a wider merchandise trade deficit raises the demand for foreign currency and puts pressure on the domestic currency to depreciate.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1 only

Q7. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. A large rise in the value of a country's electronics exports does not by itself show a comparable rise in domestic value addition in its electronics sector.
  2. The recorded export value of a manufactured good includes the value of any imported components embedded in it.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct

Q8. In India's Balance of Payments statistics, remittances sent home by Indians employed overseas are recorded under which one of the following?

  • A. Portfolio investment in the financial account
  • B. Secondary income in the current account
  • C. Services trade in the current account
  • D. Primary income in the current account