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

What is the term for the price at which demand and supply in a market are equal?

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Which of the following is a feature of monopolistic competition?

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What does the term "depreciation" refer to in the context of assets?

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What does the term “elasticity of demand” measure?

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What is meant by “liquidity trap”?

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Which of the following is NOT part of the World Bank Group?

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Which of the following is an example of fiscal policy?

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What does “balance of trade” refer to?

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What is meant by “marginal propensity to consume”?

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What is “currency devaluation”?

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