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 of the following statements best defines Gross Domestic Product (GDP)?

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What is the purpose of the "Minimum Support Price" (MSP) in India?

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What is the main objective of disinvestment in public sector undertakings (PSUs)?

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What is meant by “crowding out” in economics?

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What is “inflation targeting”?

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What does “primary sector” of the economy include?

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What is the main aim of Public Distribution System (PDS) in India?

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Which of the following sectors contributes the most to India’s GDP?

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Which term refers to the decrease in the value of a currency relative to foreign currencies?

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Which of the following is an example of a renewable resource?

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