UPSC Prelims Practice Questions — India’s current account deficit widens to $4.2 bn in Q1 FY27
Q1. Consider the following statements regarding the current account and the capital and financial account of India's balance of payments:
1. The current account records transactions in goods, services, primary income and secondary income, whereas the capital and financial account records transactions such as direct investment and portfolio investment.
2. Personal transfers such as remittances from Indians employed overseas are recorded exclusively in the primary income account, while the secondary income account records only investment income.
3. In the first quarter of 2026-27 the current account was in deficit while the capital and financial account was in surplus, so the overall balance of payments necessarily recorded a surplus.
Which of the statements given above is/are correct?
- The current account records transactions in goods, services, primary income and secondary income, whereas the capital and financial account records transactions such as direct investment and portfolio investment.
- Personal transfers such as remittances from Indians employed overseas are recorded exclusively in the primary income account, while the secondary income account records only investment income.
- In the first quarter of 2026-27 the current account was in deficit while the capital and financial account was in surplus, so the overall balance of payments necessarily recorded a surplus.
- A. 1 only
- B. 1 and 2 only
- C. 2 and 3 only
- D. 1, 2 and 3
Q2. Among the following heads of India's current account, which one recorded the largest net inflow in the first quarter of 2026-27?
- A. Net services receipts, led by computer services, business services and transportation
- B. Personal transfer receipts, mainly remittances by Indians employed overseas
- C. Net receipts on the primary income account, largely comprising investment income
- D. Net earnings on merchandise trade, that is, goods exports less goods imports
Q3. With reference to the Reserve Bank of India's preliminary balance of payments data for the first quarter of 2026-27, consider the following statements:
1. The current account deficit stood at $4.2 billion, equivalent to 0.5 per cent of GDP.
2. The merchandise trade deficit rose to $86.1 billion from $68.9 billion in the corresponding quarter a year earlier.
3. Net services receipts fell to $51.6 billion from $47.9 billion in the corresponding quarter a year earlier.
4. Net foreign portfolio investment recorded an inflow of $9.6 billion, against an outflow of $1.6 billion in the corresponding quarter a year earlier.
Which of the above is/are NOT correct?
- The current account deficit stood at $4.2 billion, equivalent to 0.5 per cent of GDP.
- The merchandise trade deficit rose to $86.1 billion from $68.9 billion in the corresponding quarter a year earlier.
- Net services receipts fell to $51.6 billion from $47.9 billion in the corresponding quarter a year earlier.
- Net foreign portfolio investment recorded an inflow of $9.6 billion, against an outflow of $1.6 billion in the corresponding quarter a year earlier.
- A. 1 and 2
- B. 3 and 4
- C. 1, 3 and 4
- D. 4 only
Q4. The preliminary quarterly data showing a current account deficit of $4.2 billion for April-June 2026 were compiled and released by which one of the following?
- A. The Reserve Bank of India, as part of its balance of payments statistics
- B. The National Statistical Office, under the Ministry of Statistics and Programme Implementation
- C. The Directorate General of Commercial Intelligence and Statistics, Ministry of Commerce and Industry
- D. The Department of Economic Affairs, in the Ministry of Finance
Q5. In the first quarter of 2026-27, net foreign direct investment into India was of the order of:
- A. $1.0 billion
- B. $5.2 billion
- C. $6.1 billion
- D. $9.6 billion
Q6. Consider the following statements comparing the first quarter of 2026-27 with the corresponding quarter of the previous year:
1. Net services receipts increased, with the rise led by computer services, business services and transportation.
2. Net inflows under external commercial borrowings fell to about $1 billion from about $5.5 billion.
3. Net foreign direct investment declined, while net foreign portfolio investment increased.
Which of the statements given above is/are correct?
- Net services receipts increased, with the rise led by computer services, business services and transportation.
- Net inflows under external commercial borrowings fell to about $1 billion from about $5.5 billion.
- Net foreign direct investment declined, while net foreign portfolio investment increased.
- A. 1 only
- B. 1 and 2 only
- C. 2 and 3 only
- D. 1, 2 and 3
Q7. India last recorded a full-year current account surplus, of about 0.9 per cent of GDP, in which one of the following fiscal years?
- A. 2018-19
- B. 2019-20
- C. 2020-21
- D. 2021-22
Q8. Consider the following statements about India's recent current account balance:
1. The current account deficit for the full year 2025-26, at $25.2 billion, was larger in absolute terms than the $22.9 billion recorded in 2024-25, though in both years it was about 0.6 per cent of GDP.
2. The current account surplus of $7.1 billion recorded in the fourth quarter of 2025-26 was larger than the surplus recorded in the fourth quarter of 2024-25.
3. The current account deficit in the first quarter of 2026-27, at 0.5 per cent of GDP, was wider than the revised deficit of 0.4 per cent of GDP in the first quarter of 2025-26.
Which of the statements given above is/are correct?
- The current account deficit for the full year 2025-26, at $25.2 billion, was larger in absolute terms than the $22.9 billion recorded in 2024-25, though in both years it was about 0.6 per cent of GDP.
- The current account surplus of $7.1 billion recorded in the fourth quarter of 2025-26 was larger than the surplus recorded in the fourth quarter of 2024-25.
- The current account deficit in the first quarter of 2026-27, at 0.5 per cent of GDP, was wider than the revised deficit of 0.4 per cent of GDP in the first quarter of 2025-26.
- A. 1 and 2 only
- B. 2 and 3 only
- C. 1 and 3 only
- D. 1, 2 and 3
Q9. The obligation of the Central Government to lay before Parliament a Medium-term Fiscal Policy Statement projecting the fiscal deficit as a percentage of GDP arises under which one of the following?
- A. The Fiscal Responsibility and Budget Management Act, 2003
- B. The Reserve Bank of India Act, 1934
- C. The Foreign Exchange Management Act, 1999
- D. The Government Securities Act, 2006
Q10. In macroeconomic analysis of the Indian economy, the 'twin deficit' problem refers to the simultaneous occurrence of which one of the following?
- A. A fiscal deficit of the government together with a deficit on the current account of the balance of payments
- B. A revenue deficit of the government together with a deficit on the merchandise trade account
- C. A primary deficit of the government together with a net outgo on the primary income account
- D. An overall balance of payments deficit together with a deficit on the capital and financial account
Q11. India's monthly merchandise export and import statistics, which capture the movement of goods across the customs frontier and are built up from daily trade returns, are compiled and published by which one of the following?
- A. Directorate General of Commercial Intelligence and Statistics, Ministry of Commerce and Industry
- B. Directorate General of Foreign Trade, Ministry of Commerce and Industry
- C. Central Board of Indirect Taxes and Customs, Ministry of Finance
- D. Office of the Economic Adviser, Department for Promotion of Industry and Internal Trade