Consider the following statements with respect to performance of the merchandise export of India in FY–2024: 1. Share of capital goods such as machinery, equipment and other durable goods decreased substantially. 2. Share of consumer goods and intermediate goods increased. Which of the statements given above is/are correct?

Correct — D, Neither 1 nor 2. Both statements invert what the record shows. The Economic Survey 2023-24 sets out the use-based composition of India's merchandise exports for exactly these two years, from DGCI&S data, and it reports that the share of capital goods in merchandise exports rose substantially, from 16.3 per cent in FY23 to 18.9 per cent in FY24 — the Survey reads that rise as evidence of India's improved supplies of machinery, equipment and other durable goods used in production processes. Statement 1 claims that share fell substantially, so it is false, and false on the very number the Survey chose to highlight. Statement 2 fails on both of its halves. The share of consumer goods in merchandise exports slipped from 48.9 per cent to 47.5 per cent, and the share of intermediate goods fell from 30.2 per cent to 28.4 per cent. The only bucket that gained apart from capital goods was raw materials, from 4.7 per cent to 5.1 per cent, and raw materials are not mentioned in either statement. So in FY24 capital goods gained share while consumer and intermediate goods both lost it — the mirror image of the paper's two claims — and neither statement stands.

• (a)1 only — Endorses the one claim the Survey's own figures contradict most sharply. Capital goods went from 16.3 per cent of merchandise exports to 18.9 per cent — a rise, not a substantial fall.
• (b)2 only — This is the trap answer, because the statement is true of imports and false of exports. On the import side both the consumer goods share and the intermediate goods share edged up in FY24; on the export side both fell.
• (c)Both 1 and 2 — Requires the capital goods share to have collapsed and the consumer and intermediate shares to have risen. In FY24 exactly the opposite pair of movements occurred.

Trade data can be sorted by commodity — engineering goods, petroleum, gems and jewellery — or by what the buyer does with the item, which is the use-based or 'broad economic category' view. That second cut sorts the basket into capital goods (machinery and equipment that go on to produce other things), intermediate goods (semi-finished inputs and components), consumer goods (finished articles bought for use) and raw materials. It matters because a rising capital goods share signals that a country is selling the machines other economies build with, which is a higher rung than selling their inputs. India's merchandise exports were about USD 437 billion in FY24, down from about USD 451 billion in FY23, while merchandise imports fell further, from USD 716 billion to USD 675.4 billion, so the merchandise trade deficit narrowed to USD 238.3 billion from USD 264.9 billion.

This item is built out of a real pair of paragraphs and then flipped. The Economic Survey 2023-24 discusses export composition in paragraph 4.15 and import composition in paragraph 4.23, and the two paragraphs move in opposite directions: on the export side capital goods gained share while consumer and intermediate goods lost it; on the import side the capital goods share rose from 18.7 per cent to 20.5 per cent and the consumer and intermediate shares also ticked up. The stem's phrase 'machinery, equipment and other durable goods' is lifted almost word for word from the Survey's import paragraph, which is why a candidate who has revised the Survey can still be walked into option (b) — the second statement is a true sentence about imports pasted onto a question about exports. The safer route is to reason from the year itself. FY24 was the year global commodity prices fell, so petroleum and chemicals, the heart of the intermediate basket, lost value fastest, while engineering and electronic goods held up. That alone tells you the intermediate share was falling and the capital goods share was not. One note on the printing: the paper writes the year as FY–2024, with a dash rather than the usual FY24 or FY 2023-24, but it plainly means the financial year that closed on 31 March 2024.

• Economic Survey 2023-24, paragraph 4.15: the share of capital goods in India's merchandise exports rose from 16.3 per cent in FY23 to 18.9 per cent in FY24.
• Over the same two years the consumer goods share of exports fell from 48.9 per cent to 47.5 per cent and the intermediate goods share from 30.2 per cent to 28.4 per cent; raw materials rose from 4.7 per cent to 5.1 per cent.
• On the import side the movements ran the other way — the capital goods share of merchandise imports rose from 18.7 per cent to 20.5 per cent, with the consumer and intermediate shares also rising slightly.
• India's merchandise exports were about USD 437 billion in FY24 against about USD 451 billion in FY23; imports fell from USD 716 billion to USD 675.4 billion, narrowing the merchandise trade deficit to USD 238.3 billion from USD 264.9 billion.
• The Survey's use-based split was built by mapping 6-digit HS commodities onto the Standard Product Groups of the World Bank's World Integrated Trade Solution and the UN Statistics Division's Broad Economic Categories (Revision 5), covering 99.9 per cent of the export basket.

• Carrying an import fact across to an export question — the two composition paragraphs of the Economic Survey move in opposite directions for FY24.
• Assuming a year in which total exports fell must have seen every share fall; shares are relative, so a category that merely shrank less than the total gains share.
• Reading 'capital goods' as a synonym for 'engineering goods'. Engineering goods is a commodity heading; capital goods is a use-based category assembled from many headings.

As a two-statement item on the direction of a share, or as a single-line question naming a percentage. The examiner's favourite device is to state a fact about imports and ask it about exports, or the reverse.

• practice — not a real PYQ

  In the use-based classification of merchandise trade, which one of the following would be counted as a capital good?

  • (a)Refined petroleum sold to a power plant
  • (b)A textile machine sold to a garment factory
  • (c)Cotton yarn sold to a weaving unit
  • (d)A ready-made shirt sold to a retailer

  Answer(b) A textile machine sold to a garment factory — capital goods are the machinery and equipment used to produce other goods. Petroleum and cotton yarn are intermediate goods, and a shirt is a consumer good.

• practice — not a real PYQ

  India's merchandise trade deficit narrowed in FY24 compared with FY23. Which one of the following best explains it?

  • (a)Merchandise exports grew while imports were flat
  • (b)Both exports and imports contracted, but imports fell by more
  • (c)Both exports and imports grew, but exports grew faster
  • (d)Merchandise imports were banned in several categories

  Answer(b) Both exports and imports contracted, but imports fell by more — exports came down to about USD 437 billion and imports to USD 675.4 billion, narrowing the deficit to USD 238.3 billion from USD 264.9 billion.