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

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What is the primary goal of a progressive tax system?

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Which of the following is NOT a function of the World Trade Organization (WTO)?

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What is “open market operations” (OMO)?

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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 a direct tax?

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

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Which of the following is a feature of monopolistic competition?

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

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

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