UPSC Prelims Practice Questions — The cumulative exports (merchandise & services) during April-October 2026-27 are estimated at US$ 568.84 Billion, as compared to US$ 487.59 Billion in April-October 2025-26, an estimated growth of 16.66%.

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

  1. Purchases of shares of Indian companies by foreign portfolio investors are recorded in the current account.
  2. India can record a current account surplus in a quarter even while running a merchandise trade deficit in that quarter.
  3. Interest and dividends paid to foreign investors on their investments in India appear as debits in the current account.
  • A. 1, 2 and 3
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1 and 2 only

Q2. Consider the following transactions undertaken by Indian residents: Which of the above would be recorded as exports of services in India's Balance of Payments?

  1. An Indian firm delivers custom software to a client in the USA over the internet.
  2. Foreign tourists pay for hotel stays and local travel within India.
  3. An Indian shipping company earns freight charges for carrying a foreign firm's cargo.
  4. An Indian exporter ships cut and polished diamonds to a buyer in Belgium.
  • A. 1, 2 and 3 only
  • B. 2, 3 and 4 only
  • C. 1 and 2 only
  • D. 1, 2, 3 and 4

Q3. Consider the following facts about India's exports in October 2026: petroleum products and gems & jewellery were among the main drivers of export growth; non-petroleum exports were US$ 40.58 billion; and exports excluding both petroleum and gems & jewellery were US$ 37.38 billion. Which of the following inferences can be drawn from the above?

  1. Part of the month's export growth came from items whose export values move closely with international commodity prices.
  2. India's exports of petroleum products exceeded its imports of crude oil in October 2026.
  3. Petroleum products made up more than half of India's merchandise exports in October 2026.
  • A. 1, 2 and 3
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1 only

Q4. With reference to a country that runs a persistent current account deficit, consider the following statements: Which of the statements given above is/are correct?

  1. The deficit has to be met through net inflows on the financial account or by drawing down foreign exchange reserves.
  2. A deficit financed mainly by short-term portfolio flows is more exposed to an abrupt reversal than one financed mainly by foreign direct investment.
  3. The pressure on the domestic currency to depreciate tends to make imported goods costlier for domestic buyers.
  • A. 2 and 3 only
  • B. 1 only
  • C. 1, 2 and 3
  • D. 1 and 3 only

Q5. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. Money sent home by Indians employed abroad is counted as an export of services in India's Balance of Payments.
  2. Personal transfers are recorded in the current account as secondary income, separately from trade in services.
  • 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