UPSC Prelims 2005 Q15: Indian Economy – External Sector & Balance Of Payments
Consider the following statements :
1. During the year 2004, India’s foreign exchange reserves did not exceed the 125 billion U.S.
Dollar mark
2. The series of index numbers of wholesale prices introduced from April, 2000 has the year
1993 - 94 as base year.
Which of the statements given above is/are correct?
- (a) 1 only
- (b) 2 only
- (c) Both 1 and 2
- (d) Neither 1 nor 2
Answer: (b) 2 only
Explanation
Foreign exchange reserves and WPI series
| Statement | Verdict |
|---|---|
| 1. Forex reserves did not exceed 125 billion USD in 2004 | False: reserves crossed 125 billion USD by December 2004 |
| 2. WPI series from April 2000 has 1993-94 base | True — base year 1993-94, introduced in April 2000 |
Only statement 2 is correct. India's foreign exchange reserves crossed 125 billion USD towards the end of 2004.
Answer: (b) 2 only.
Why each option is right or wrong
- (a) Incorrect. Reserves did exceed 125 billion USD in 2004.
- (b) CORRECT. Only the WPI base-year statement is correct.
- (c) Incorrect. Statement 1 is false.
- (d) Incorrect. Statement 2 is correct.
Key point
WPI base: 1993-94 (from April 2000); next revised to 2004-05.
Remember
WPI series from April 2000 has 1993-94 as its base year.
Common mistakes
- Reading the question as asking whether reserves were large.
- Mixing up the WPI base year (1993-94) with CPI series.
- Misremembering forex numbers as in 2005 or 2006.
Exam tip
WPI bases: 1981-82, 1993-94, 2004-05, 2011-12.
Sources
- Reserve Bank of India — Handbook of Statistics on the Indian Economy (foreign exchange reserves)
- Office of the Economic Adviser, Ministry of Commerce and Industry — Wholesale Price Index: base year revisions (1993–94 and 2004–05)