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 does the “Human Development Index” measure?

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What is “inclusive growth”?

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

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Which of the following is an example of fiscal policy?

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Which of the following best describes “capital formation”?

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What is the primary function of the International Monetary Fund (IMF)?

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Which of the following is NOT an example of an indirect tax?

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

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Which of the following is a feature of monopolistic competition?

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What is the main aim of the “Startup India” initiative?

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