Topic Details (Notes format)

External Sector Overview

Subject: Economics

Book: Comprehensive Indian Economy

India’s external sector includes trade in goods/services, capital flows (FDI, FPI), external commercial borrowings, and currency exchange. Policies strive to maintain a healthy balance of payments and adequate foreign exchange reserves. Key agencies—like the Directorate General of Foreign Trade—oversee export-import regulations. The shift from a closed economy to an export-oriented one brought new challenges: trade imbalances, currency fluctuations, and global competitiveness. Exam angles often cover India’s major trading partners, trade deficits with specific blocs, and how FTAs shape domestic industries. Students should also watch for external shocks like global oil price spikes or changing US Fed rates.

Practice Questions

Which term refers to an economy that has elements of both capitalism and socialism?

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Which of the following is a feature of a command economy?

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Which of the following is a direct tax?

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What is the meaning of “disguised unemployment”?

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What is meant by “liquidity trap”?

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What is the meaning of “dumping” in international trade?

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Which of the following is an example of a capital receipt for the government?

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What does the “Phillips Curve” show?

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What does “inclusive banking” mean?

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Which of the following causes demand-pull inflation?

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