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External Sector & Balance Of Payments

49 questions in Indian Economy.

Asked in 2006, 2005, 2004, 2003, 2002, 2001, 2000, 1999, 1998, 1996, 1995

2006 · Q16Indian EconomyExternal Sector & Balance Of Paymentsmoderate

Assertion (A): ‘Balance of Payments’ represents a better picture of a country’s economic transactions with the rest of the world than the ‘Balance of Trade’. Reason (R): ‘Balance of Payments’ takes into account the exchanges of both visible and invisible items whereas ‘Balance of Trade’ does not.

  1. (a)Both A and R are true and R is the correct explanation of A
  2. (b)Both A and R are true but R is not a correct explanation of A
  3. (c)A is true but R is false
  4. (d)A is false but R is true
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Official answer(a) Both A and R are true and R is the correct explanation of A

2006 · Q42Indian EconomyExternal Sector & Balance Of Paymentsmoderate

Consider the following statements: 1. In India, during the financial year 2004-2005 an increase of below 10 % over the value of exports (in rupee terms) in the financial year 2003-2004 was reported. 2. According to the WTO, India’s share in the world merchandise exports is 2 % in the year 2005. Which of the statements given above is/are correct?

  1. (a)1 only
  2. (b)2 only
  3. (c)Both 1 and 2
  4. (d)Neither 1 nor 2
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Official answer(d) Neither 1 nor 2

2004 · Q75Indian EconomyExternal Sector & Balance Of Paymentsmoderate

Assertion (A): For the first time, India had no trade deficit in the year 2002-03. Reason (R): For the first time, India's exports crossed worth $50 billion in the year 2002-03.

  1. (a)Both A and R are individually true and R is the correct explanation of A
  2. (b)Both A and R are individually true but R is not the correct explanation of A
  3. (c)A is true but R is false
  4. (d)A is false but R is true
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Official answer(d) A is false but R is true

2003 · Q58Indian EconomyExternal Sector & Balance Of Paymentsmoderate

Which one of the following statements is correct with reference to FEMA in India?

  1. (a)The Foreign Exchange Regulation Act (FERA), was replaced by Foreign Exchange Management Act (FEMA) in the year 2001
  2. (b)FERA was given a sunset clause of one year till 31st May 2002 to enable Enforcement Directorate to complete the investigation of pending issues
  3. (c)Under FEMA, violation of foreign exchange rules has ceased to be a criminal offence
  4. (d)As per the new dispensation, Enforcement Directorate can arrest and prosecute the people for the violation of foreign exchange rules
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Official answer(c) Under FEMA, violation of foreign exchange rules has ceased to be a criminal offence

2003 · Q85Indian EconomyExternal Sector & Balance Of Paymentsmoderate

With reference to Government of India’s decisions regarding Foreign Direct Investment (FDI) during the year 2001-02, consider the following statements: 1. Out of the 100% FDI allowed by India in tea sector, the foreign firm would have to disinvest 33% of the equity in favour of an Indian partner within four years. 2. Regarding the FDI in print media in India, the single largest Indian shareholder should have a holding higher than 26%. Which of these statements is/are correct?

  1. (a)Only 1
  2. (b)Only 2
  3. (c)Both 1 and 2
  4. (d)Neither 1 nor 2
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Official answer(b) Only 2

2003 · Q102Indian EconomyExternal Sector & Balance Of Paymentsmoderate

Assertion (A): During the year 2001-02, the value of India’s total exports declined, registering a negative growth of 2.17%. Reason (R): During the year 2001-02, negative growth in exports was witnessed in respect of iron and steel, coffee, textiles and marine products.

  1. (a)Both A and R are individually true and R is the correct explanation of A
  2. (b)Both A and R are individually true but R is NOT the correct explanation of A
  3. (c)A is true but R is false
  4. (d)A is false but R is true
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Official answer(d) A is false but R is true

2002 · Q133Indian EconomyExternal Sector & Balance Of Paymentseasy

A country is said to be in debt trap if

  1. (a)it has to abide by the conditionalities imposed by the International Monetary Fund
  2. (b)it has to borrow to make interest payments on outstanding loans
  3. (c)it has been refused loans or aid by creditors abroad
  4. (d)the World Bank charges a very high rate of interest on outstanding as well as new loans
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Official answer(b) it has to borrow to make interest payments on outstanding loans

2002 · Q137Indian EconomyExternal Sector & Balance Of Paymentsmoderate

Consider the following statements: Full convertibility of the rupee may mean 1. Its free float with other international currencies. 2. Its direct exchange with any other international currency at any prescribed place inside and outside the country. 3. It acts just like any other international currency. Which of these statements are correct?

  1. (a)1 and 2
  2. (b)1 and 3
  3. (c)2 and 3
  4. (d)1, 2 and 3
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Official answer(d) 1, 2 and 3

2001 · Q31Indian EconomyExternal Sector & Balance Of Paymentsmoderate

Assertion (A): Ceiling on foreign exchange for a host of current account transaction heads was lowered in the year 2000. Reason (R): There was a fall in foreign currency assets also.

  1. (a)Both A and R are individually true, and R is the correct explanation of A
  2. (b)Both A and R are individually true, but R is NOT a correct explanation of A
  3. (c)A is true, but R is false
  4. (d)A is false, but R is true
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Official answer(c) A is true, but R is false

2000 · Q88Indian EconomyExternal Sector & Balance Of Paymentsmoderate

Assertion (A): The rate of growth of India’s exports has shown an appreciable increase after 1991. Reason (R): The Government of India has resorted to devaluation.

  1. (a)Both A and R are true, and R is the correct explanation of A
  2. (b)Both A and R are true, but R is not a correct explanation of A
  3. (c)A is true, but R is false
  4. (d)A is false, but R is true
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Official answer(b) Both A and R are true, but R is not a correct explanation of A

1999 · Q99Indian EconomyExternal Sector & Balance Of Paymentseasy

Assertion (A): Devaluation of a currency may promote export. Reason (R): Price of the country's products in the international market may fall due to devaluation.

  1. (a)Both A and R are true, and R is the correct explanation of A
  2. (b)Both A and R are true, but R is not a correct explanation of A
  3. (c)A is true, but R is false
  4. (d)A is false, but R is true
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Official answer(a) Both A and R are true, and R is the correct explanation of A

1998 · Q16Indian EconomyExternal Sector & Balance Of Paymentsmoderate

Consider the following statements: The price of any currency in the international market is decided by the I. World Bank II. Demand for goods/services provided by the country concerned III. Stability of the government of the concerned country IV. Economic potential of the country in question Of these statements:

  1. (a)I, II, III and IV are correct
  2. (b)II and III are correct
  3. (c)III and IV are correct
  4. (d)I and IV are correct
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Official answer(b) II and III are correct

1998 · Q91Indian EconomyExternal Sector & Balance Of Paymentsmoderate

Which one of the following is the correct sequence of decreasing order of the given currencies in terms of their value in Indian Rupees?

  1. (a)US dollar, Canadian dollar, New Zealand dollar, Hong Kong dollar
  2. (b)US dollar, New Zealand dollar, Canadian dollar, Hong Kong dollar
  3. (c)US dollar, Hong Kong dollar, New Zealand dollar, Canadian dollar
  4. (d)US dollar, Hong Kong dollar, Canadian dollar, New Zealand dollar
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Official answer(a) US dollar, Canadian dollar, New Zealand dollar, Hong Kong dollar

1998 · Q93Indian EconomyExternal Sector & Balance Of Paymentsmoderate

Capital Account Convertibility of the Indian Rupee implies

  1. (a)that the Indian Rupee can be exchanged by the authorised dealers for travel
  2. (b)that the Indian Rupee can be exchanged for any major currency for the purpose of trade in goods and services
  3. (c)that the Indian Rupee can be exchanged for any major currency for the purpose of trading financial assets
  4. (d)None of the above
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Official answer(c) that the Indian Rupee can be exchanged for any major currency for the purpose of trading financial assets

1996 · Q34Indian EconomyExternal Sector & Balance Of Paymentsmoderate

One of the important goals of the economic liberalisation policy is to achieve full convertibility of the Indian rupee. This is being advocated because

  1. (a)convertibility of the rupee will stabilize its exchange value against major currencies of the world
  2. (b)it will attract more foreign capital inflow in India
  3. (c)it will help promote exports
  4. (d)it will help India secure loans from the world financial markets at attractive terms
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Official answer(c) it will help promote exports

1996 · Q51Indian EconomyExternal Sector & Balance Of Paymentseasy

Hawala transactions relate to payments

  1. (a)received in rupees against overseas currencies and vice versa without going through the official channels
  2. (b)received for sale/transfer of shares without going through the established stock exchanges
  3. (c)received as commission for services rendered to overseas investors/buyers/sellers in assisting them to get over the red tape and/or in getting preferential treatment
  4. (d)made to political parties or to individuals for meeting election expenses
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Official answer(a) received in rupees against overseas currencies and vice versa without going through the official channels

1996 · Q140Indian EconomyExternal Sector & Balance Of Paymentsmoderate

The changing composition of the export trade is indicative of structural transformation of Indian economy in favour of modernisation. The best indicator of the trend is the

  1. (a)relative share of petroleum products in exports
  2. (b)decline in the share of agricultural products in exports
  3. (c)constant share of ores and minerals in exports
  4. (d)increase in the share of manufactured products in exports
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Official answer(d) increase in the share of manufactured products in exports

1995 · Q35Indian EconomyExternal Sector & Balance Of Paymentsdifficult

Which of the following pairs are correctly matched? I. Increase in foreign exchange reserves ................. Monetary expansion II. Low import growth rate in India ...................... Recession in Indian Industry III. Euro issues ................ Shares held by Indian companies in European countries IV. Portfolio investment ............... Foreign institutional investors Select the correct answer by using the following codes:

  1. (a)I, II and IV
  2. (b)III and IV
  3. (c)I, II and III
  4. (d)I, II, III and IV
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Official answer(a) I, II and IV