UPSC Prelims 2004 Q75: Indian Economy – External Sector & Balance Of Payments
Assertion (A): For the first time, India had no trade deficit in the year 2002 - 03.
Reason (R): For the first time, India's exports crossed worth $50 billion in the year 2002 - 03.
- (a) Both A and R are individually true and R is the correct explanation of A
- (b) Both A and R are individually true but R is not the correct explanation of A
- (c) A is true but R is false
- (d) A is false but R is true
Answer: (d) A is false but R is true
Explanation
India's trade balance in 2002-03
| Part | Verdict |
|---|---|
| A. India had no trade deficit in 2002-03 | False: there was a trade deficit of about $11 billion; it was the current account that showed a surplus |
| R. India's exports crossed $50 billion in 2002-03 | True — about $52.7 billion |
A is false because India still had a trade deficit that year; R is true since exports crossed the $50 billion mark for the first time.
Answer: (d) A is false but R is true.
Why each option is right or wrong
- (a) Incorrect. A is false, so R cannot explain it.
- (b) Incorrect. A is false, as there was a trade deficit.
- (c) Incorrect. R is true, so this code is wrong.
- (d) CORRECT. A is false because a trade deficit of about 11 billion dollars remained, while R is true.
Key point
2002-03: exports $52.7 bn, imports $64 bn, trade deficit $11 bn; current account surplus.
Remember
India's exports crossed $50 billion in 2002-03, but a trade deficit remained.
Common mistakes
- Confusing the current account surplus with a trade surplus.
- Forgetting that imports were also higher than exports.
- Thinking exports crossing $50 bn removes the deficit.
Exam tip
Trade balance is merchandise only; current account includes services and transfers.
Sources
- Economic Survey 2003-04
- Reserve Bank of India — Annual Report 2002–03 (Balance of Payments)