BPSC 69th CCE Prelims General Studies · Question 124 of 144

Correct — C, Increase in exports is greater than increase in imports. The question asks for the statement that is not true, so the work is to confirm that (a) and (b) are true of India and then show that (c) is not. Statement (c) fails on the Economic Survey 2022-23's own arithmetic, and it fails by a wide margin. Merchandise exports were US$ 332.8 billion over April-December 2022 against US$ 305.0 billion in April-December 2021 — a rise of about US$ 27.8 billion. Merchandise imports over the same window were US$ 551.7 billion against US$ 441.5 billion — a rise of about US$ 110.2 billion, roughly four times the increase in exports. The consequence is stated directly in para 11.14: “The merchandise trade deficit for April-December 2022 was estimated at US$ 218.9 billion as against US$ 136.5 billion in April-December 2021.” A deficit that widens by more than US$ 82 billion in a single year is the definition of imports rising faster than exports. The structural picture in the Survey's Table XI.1 says the same thing over a longer run: India's share of world merchandise exports was 1.7 per cent in 2019, 1.6 per cent in 2020 and 1.8 per cent in 2021, while its share of world merchandise imports over the same three years was 2.5, 2.1 and 2.5 per cent — India buys a larger slice of world goods trade than it sells. Statement (a) is true, and it is true on both legs of trade. On goods, the Survey records that “India achieved an all-time high annual merchandise export of US$ 422.0 billion in FY22”. On services, India's exports “stood at US$ 254.5 billion in FY22 recording a growth of 23.5 per cent over FY21” and grew a further 32.7 per cent in April-September 2022 year on year, with software and business services together making up more than 60 per cent of the total. India's share of world commercial services exports rose from 3.5 per cent in 2019 to 4.0 per cent in 2021 — more than double its share in merchandise exports. Statement (b) is true as well. The Survey records the “highest-ever annual gross FDI inflow of USD 84.8 billion… in FY22”, and gross FDI rising from an average of 2.2 per cent of GDP in FY05-FY14 to 2.6 per cent in FY15-FY22; even in the weaker first half of FY23, inflows “stayed well above the pre-pandemic levels”. Whatever else globalisation has done to India, it has unambiguously raised the flow of direct foreign investment into it. With (a) and (b) both true and (c) false, option (d) “None of the above” cannot stand. One honest qualification, because it is where a thoughtful candidate hesitates. India does run a surplus in services trade — services exports of US$ 254.5 billion against services imports of US$ 147.0 billion in FY22 — so on the services leg alone, exports exceed imports comfortably. Statement (c) is nonetheless not true of India's trade taken as a whole, because the merchandise deficit is far larger than the services surplus: US$ 218.9 billion of merchandise deficit for April-December 2022 against a net services surplus of the order of US$ 107 billion for the whole of FY22 — not the same window, and the card does not pretend otherwise; the point survives the mismatch because no plausible alignment of the two closes the gap. The services surplus narrows the overall gap; it does not close it, which is why India runs a current account deficit. This answer is ours, derived independently by two models that could not see each other's work and agreed at high confidence; the 69th CCE has no official key.

• (a)It has expanded trade in goods and services. — This is true, so it cannot be the 'not true' statement the stem asks for. India's merchandise exports reached an all-time high of US$ 422.0 billion in FY22 and its services exports US$ 254.5 billion in the same year, up 23.5 per cent on FY21, with a further 32.7 per cent rise in April-September 2022. India's share of world commercial services exports rose from 3.5 per cent in 2019 to 4.0 per cent in 2021. Candidates sometimes reject this option because they associate globalisation with import penetration, forgetting that the expansion runs in both directions.
• (b)It has led to greater flow of Foreign Direct Investment. — Also true, and therefore not the answer. The Economic Survey 2022-23 records India's highest-ever annual gross FDI inflow at US$ 84.8 billion in FY22 and gross FDI rising from an average 2.2 per cent of GDP in FY05-FY14 to 2.6 per cent in FY15-FY22, with inflows staying above pre-pandemic levels even through the FY23 moderation. Rising FDI is one of the least contested consequences of India's opening after 1991.
• (d)None of the above — 'None of the above' would be correct only if every listed statement were true of India, and statement (c) is not — the Survey's figures show imports rising by about US$ 110 billion against about US$ 28 billion for exports over April-December 2022, widening the merchandise trade deficit to US$ 218.9 billion. This option catches candidates who read the stem as 'which of these is true' and then find that two of the three are, or who assume a negatively worded question must have no clean answer.

Globalisation, in the Indian context, dates operationally from the 1991 reforms — devaluation, the abolition of industrial licensing, tariff reduction and the progressive opening of sectors to foreign investment — and its measurable effects show up in three places: trade volumes, capital flows and the external balance. The balance of trade counts only visible goods; the balance of payments counts everything, splitting into a current account (merchandise, services, primary income and transfers) and a capital and financial account (FDI, portfolio flows, loans, reserves). India's characteristic pattern is a large merchandise deficit, driven by crude oil, gold, electronics and coal, offset in part by a strong services surplus built on software and business services and by remittances, leaving a residual current account deficit that is financed largely by non-debt-creating FDI. That is why 'exports grew faster than imports' is a claim that has to be checked against the merchandise and services legs separately before it is asserted about the whole.

The reasoning shortcut for a 'which is not true' question is to look for the statement that makes a comparative or quantitative claim, because the qualitative ones are usually safe. Options (a) and (b) assert directions of change that four decades of data support in one direction only — trade up, FDI up. Option (c) asserts a ranking between two rates of increase, and a ranking is the kind of claim that can be false even when both quantities are rising. That structural cue points at (c) before any figure is recalled. The discriminating fact is India's persistent and widening merchandise trade deficit: US$ 218.9 billion over April-December 2022 against US$ 136.5 billion a year earlier. The reason it widens rather than closes is compositional — India's largest single import is crude oil, whose bill rises with world prices whatever domestic exporters achieve. The Survey records petroleum crude and products imports at US$ 163.9 billion in April-December 2022, up 45.6 per cent year on year, with fuel's share of total imports climbing to 37.1 per cent from 30.4 per cent. The trap in the option is that it is true of one part of the picture: India's services exports do outgrow its services imports, and a candidate who has the IT-export story in mind may generalise it to trade as a whole.

• Merchandise exports were US$ 332.8 billion in April-December 2022 against US$ 305.0 billion a year earlier, while imports were US$ 551.7 billion against US$ 441.5 billion — imports rose by about US$ 110 billion, exports by about US$ 28 billion (Economic Survey 2022-23, paras 11.10 and 11.12).
• The merchandise trade deficit widened to US$ 218.9 billion in April-December 2022 from US$ 136.5 billion in April-December 2021 (para 11.14).
• India's all-time high annual merchandise export was US$ 422.0 billion in FY22; services exports were US$ 254.5 billion in FY22, up 23.5 per cent, against services imports of US$ 147.0 billion, up 25.1 per cent (paras 11.10, 11.16, 11.17).
• India's share of world merchandise exports was 1.7, 1.6 and 1.8 per cent in 2019, 2020 and 2021, against a share of world merchandise imports of 2.5, 2.1 and 2.5 per cent; its share of world commercial services exports rose from 3.5 to 4.0 per cent over the same period (Table XI.1).
• Petroleum crude and products imports rose 45.6 per cent to US$ 163.9 billion in April-December 2022, and fuel's share of total imports rose to 37.1 per cent from 30.4 per cent a year earlier (paras 11.12-11.13).
• India's highest-ever annual gross FDI inflow was US$ 84.8 billion in FY22, with gross FDI averaging 2.6 per cent of GDP over FY15-FY22 against 2.2 per cent over FY05-FY14.

• Generalising the software-export success story to trade as a whole — India's services surplus is real but smaller than its merchandise deficit
• Reading a 'not true' stem as 'true' and picking the first correct-sounding statement; on negatively worded questions, mark each option true or false before choosing
• Assuming rising exports imply a shrinking trade gap — both exports and imports can rise while the deficit widens, which is precisely what happened in April-December 2022

BPSC frames globalisation as a short 'which is not true' list mixing two safe qualitative claims with one quantitative comparison, so the exam-hall move is to attack the comparison; it expects the direction of India's trade balance rather than any figure. UPSC gets at the same material through the accounting — assertion-and-reason items on balance of payments versus balance of trade, or statement sets on whether merchandise exports fall short of imports and whether services run a surplus — so it rewards knowing which account an item sits in as much as knowing the trend.

• practice — not a real PYQ

  With reference to India's external sector, which one of the following statements is correct?

  • (a)India runs a surplus on merchandise trade and a deficit on services trade
  • (b)India runs a deficit on merchandise trade and a surplus on services trade
  • (c)India runs a surplus on both merchandise and services trade
  • (d)India runs a deficit on both merchandise and services trade

  Answer(b) India runs a deficit on merchandise trade and a surplus on services trade — merchandise imports of US$ 551.7 billion against exports of US$ 332.8 billion in April-December 2022, while services exports of US$ 254.5 billion exceeded services imports of US$ 147.0 billion in FY22.

• practice — not a real PYQ

  According to the Economic Survey 2022-23, India's merchandise trade deficit during April-December 2022 was closest to which of the following?

  • (a)US$ 136.5 billion
  • (b)US$ 163.9 billion
  • (c)US$ 218.9 billion
  • (d)US$ 332.8 billion

  Answer(c) US$ 218.9 billion — up from US$ 136.5 billion in April-December 2021; US$ 163.9 billion was the petroleum crude and products import bill and US$ 332.8 billion the merchandise export figure.