UPSC General Studies Sample Paper General Studies Sample Paper-7

  • question_answer
    Consider the following statements regarding the Indian Economy.                       
    1. Balance of Payment (BoP) is a sum total of balance of trade, factor income, cash transfers and invisibles.
    2. India is having a current account surplus.                                                  
    3. When Indian currency depreciates against US Dollar, the current account deficit of the country increases.                                                                                  
    4. When money (rupee) depreciates against the US dollar, the export sector benefits.              
    Which of the statements given above are correct?                                         

    A)  3 and 4           

    B)  1, 3 and 4            

    C)                      1, 2 and 4                    

    D)  2 and 3                                 

    Correct Answer: B

    Solution :

    [b] Statement 1 is the definition for current account. BoP includes both current account and capital accounts. Statements 3 and 4 are correct, because when Indian currency depreciates against US dollar, the exporters who will get money in foreign currency benefits, because of large return in terms\of rupee. But, the importers need large amount rupee to buy foreign currencies. So, it is a negative one for them. India is always having a current account deficit.                

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