UPSC Prelims Practice Questions — The warning signs in India’s import bill

Q1. In India's external-sector data for 2025-26, which showed a record figure of about US$ 333 billion, the term 'merchandise trade deficit' is best defined as:

  • A. The excess of India's imports of goods over its exports of goods
  • B. The excess of India's imports of goods and services over its exports of goods and services
  • C. The shortfall of foreign exchange reserves relative to total external debt
  • D. The gap between total imports and the country's foreign exchange reserves

Q2. India's official monthly merchandise export and import figures, which recorded a trade deficit of about US$ 333 billion in 2025-26, are compiled and released by which of the following?

  • A. Ministry of Commerce and Industry
  • B. Reserve Bank of India
  • C. Ministry of Statistics and Programme Implementation
  • D. Ministry of Finance

Q3. India's crude oil import bill for 2025-26 (about US$ 122 billion) is officially compiled and reported by which of the following bodies?

  • A. Petroleum Planning and Analysis Cell (PPAC)
  • B. Directorate General of Foreign Trade (DGFT)
  • C. Petroleum and Natural Gas Regulatory Board (PNGRB)
  • D. Central Board of Indirect Taxes and Customs (CBIC)

Q4. India's gold imports touched an all-time record in 2025-26. Approximately what was their value in that year?

  • A. About US$ 72 billion
  • B. About US$ 58 billion
  • C. About US$ 44 billion
  • D. About US$ 92 billion

Q5. Following the Prime Minister's May 2026 appeal for restraint on import-heavy spending, the increase in the import duty on gold and silver to 15% was notified through which ministry?

  • A. Ministry of Finance
  • B. Ministry of Commerce and Industry
  • C. Ministry of Consumer Affairs, Food and Public Distribution
  • D. Ministry of Mines

Q6. With reference to the Prime Minister's May 2026 public appeal on curbing import-linked expenditure, consider the following: 1. Delaying the purchase of gold for one year. 2. Reducing consumption of edible oil. 3. Cutting down on unnecessary foreign travel. 4. Imposing a statutory ban on all gold imports for one year. Which of the above is/are NOT correct?

  1. Delaying the purchase of gold for one year.
  2. Reducing consumption of edible oil.
  3. Cutting down on unnecessary foreign travel.
  4. Imposing a statutory ban on all gold imports for one year.
  • A. 1 only
  • B. 4 only
  • C. 3 and 4
  • D. 2 only

Q7. Comparing India's 1991 balance-of-payments crisis with its external position in 2025-26, consider the following statements: 1. In 1991 the RBI physically shipped gold abroad and pledged it to raise loans, a step it did not need to take in 2025-26 despite the record trade deficit. 2. India's foreign exchange reserves were larger in absolute terms in 1991 than in 2025-26. 3. Import cover was only a few weeks in 1991, compared with roughly 11 months in 2025-26. Which of the statements given above is/are correct?

  1. In 1991 the RBI physically shipped gold abroad and pledged it to raise loans, a step it did not need to take in 2025-26 despite the record trade deficit.
  2. India's foreign exchange reserves were larger in absolute terms in 1991 than in 2025-26.
  3. Import cover was only a few weeks in 1991, compared with roughly 11 months in 2025-26.
  • A. 1 and 2 only
  • B. 1 and 3 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q8. During the 1991 balance-of-payments crisis, to raise a foreign-currency loan the Reserve Bank of India pledged part of its gold with which of the following?

  • A. The Bank of England and the Bank of Japan
  • B. The International Monetary Fund and the World Bank
  • C. The Bank of England and the US Federal Reserve
  • D. The Bank for International Settlements and the Asian Development Bank

Q9. With reference to India's foreign exchange reserves in mid-2026, consider the following statements: 1. Reserves provided an import cover of about 11 months. 2. Reserves covered close to 89% of India's external debt. 3. Reserves stood at about US$ 682 billion in late May 2026. 4. Reserves were sufficient to cover India's entire external debt more than twice over. Which of the above is/are NOT correct?

  1. Reserves provided an import cover of about 11 months.
  2. Reserves covered close to 89% of India's external debt.
  3. Reserves stood at about US$ 682 billion in late May 2026.
  4. Reserves were sufficient to cover India's entire external debt more than twice over.
  • A. 4 only
  • B. 1 and 2 only
  • C. 3 only
  • D. 2 and 4

Q10. Consider the following as indicators traditionally used to judge the adequacy of India's foreign exchange reserves: 1. The number of months of imports the reserves can finance. 2. The ratio of reserves to short-term and total external debt. 3. The ratio of reserves to the Union government's fiscal deficit. 4. The extent to which reserves cover the external debt outstanding. Which of the above is/are correctly identified?

  1. The number of months of imports the reserves can finance.
  2. The ratio of reserves to short-term and total external debt.
  3. The ratio of reserves to the Union government's fiscal deficit.
  4. The extent to which reserves cover the external debt outstanding.
  • A. 1 and 2 only
  • B. 2, 3 and 4
  • C. 1, 2 and 4
  • D. 1, 3 and 4

Q11. The National Mission on Edible Oils – Oilseeds (NMEO-Oilseeds), aimed at reducing India's heavy edible-oil import dependence, is implemented by which ministry?

  • A. Ministry of Agriculture and Farmers Welfare
  • B. Ministry of Consumer Affairs, Food and Public Distribution
  • C. Ministry of Commerce and Industry
  • D. Ministry of Food Processing Industries

Q12. With reference to the distinction between the trade deficit, the current account deficit and the balance of payments, consider the following statements: 1. The current account deficit is broader than the merchandise trade deficit because it also includes services, income and transfers. 2. India can run a merchandise trade deficit and yet post an overall balance-of-payments surplus if capital inflows are large enough. 3. The balance of payments consists only of the current account and excludes the capital (financial) account. Which of the statements given above is/are correct?

  1. The current account deficit is broader than the merchandise trade deficit because it also includes services, income and transfers.
  2. India can run a merchandise trade deficit and yet post an overall balance-of-payments surplus if capital inflows are large enough.
  3. The balance of payments consists only of the current account and excludes the capital (financial) account.
  • A. 1 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3