UPSC Prelims Practice Questions — The cumulative exports (merchandise & services) during April-September 2026-27 are estimated at US$ 476.20 Billion, as compared to US$ 418.31 Billion in April-September 2025-26, an estimated growth of 13.84%.

Q1. With reference to the external-sector figures for India, consider the following statements: Which of the statements given above is/are correct?

  1. The merchandise trade deficit recorded in the Balance of Payments equals the current account deficit whenever the services account is exactly in balance.
  2. The overall trade deficit in the monthly trade release nets services trade against merchandise trade but does not take remittances from Indians abroad into account.
  3. Other things remaining equal, a rise in remittance inflows narrows the current account deficit but leaves the overall goods-and-services trade deficit unchanged.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 3 only
  • D. 1, 2 and 3

Q2. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. India's current account deficit is usually much smaller than its merchandise trade deficit.
  2. Net foreign direct investment inflows are recorded in India's current account and offset a large part of its merchandise trade deficit.
  • 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

Q3. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. If India's services trade surplus increases over a period, its overall trade deficit for that period must narrow.
  2. India's overall trade balance is the sum of its merchandise trade balance and its services trade balance.
  • 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

Q4. Consider the following assertion: India's large and persistent merchandise trade deficit has not translated into an equally large current account deficit. Which of the following statements support/supports the above assertion?

  1. India's exports of services, led by software and business services, exceed its imports of services by a wide margin.
  2. India's import basket contains large volumes of crude oil and gold.
  3. India's merchandise exports grew faster in percentage terms than its merchandise imports during April–September 2026-27.
  4. Indians employed overseas send home large personal transfers that are recorded as current-account receipts.
  • A. 1 and 4 only
  • B. 2 and 3 only
  • C. 1, 3 and 4 only
  • D. 2 and 4 only

Q5. With reference to the compilation of India's monthly foreign trade figures, consider the following statements: Which of the statements given above is/are correct?

  1. The services trade figure for the latest month in the release is an estimate rather than reported data, because services transactions are captured with a lag through Balance of Payments reporting.
  2. Both merchandise and services trade figures in the release are compiled from shipping bills and bills of entry filed with customs.
  3. Once actual services data for the latest month become available, the cumulative April–September figure for total exports is left unchanged so that it matches the earlier release.
  • A. 1 and 3 only
  • B. 2 and 3 only
  • C. 1 and 2 only
  • D. 1 only

Q6. Consider the following data for India (US$ bn), comparing April–September 2025-26 with April–September 2026-27: total merchandise imports rose from 376.17 to 437.53; merchandise imports excluding petroleum and gems & jewellery rose from 244.67 to 292.88; merchandise exports excluding petroleum and gems & jewellery rose from 175.06 to 203.41. Which of the following inferences can be drawn from the above data?

  1. The combined import bill of petroleum and gems & jewellery rose by less, in absolute terms, than imports of all other goods.
  2. The widening of India's merchandise trade deficit over the period was driven mainly by higher crude oil prices.
  3. India's trade deficit in goods other than petroleum and gems & jewellery widened over the period.
  • A. 2 only
  • B. 1 and 2 only
  • C. 1 and 3 only
  • D. 2 and 3 only

Q7. With reference to India's Foreign Trade Policy 2023 and its export-support architecture, consider the following statements: Which of the statements given above is/are correct?

  1. Unlike earlier Foreign Trade Policies framed for fixed five-year periods, it has no terminal date and is revised as and when required.
  2. It shifts the emphasis of export support away from incentive-based schemes towards remission of taxes and facilitation.
  3. Under the RoDTEP scheme, exporters are reimbursed only those central, state and local duties and taxes embedded in exported products that are not refunded under any other mechanism.
  • A. 1 and 2 only
  • B. 1, 2 and 3
  • C. 2 and 3 only
  • D. 1 and 3 only

Q8. Suppose international gold prices rise sharply while the quantities of all goods India imports and exports remain unchanged. Other things being equal, consider the following statements: Which of the statements given above is/are correct?

  1. India's headline merchandise trade deficit would widen.
  2. India's trade deficit in goods other than petroleum and gems & jewellery would widen.
  • A. 1 only
  • B. 2 only
  • C. Both 1 and 2
  • D. Neither 1 nor 2