Which sector played a key role in cushioning India's overall trade deficit in the financial year 2023 - 24 ?

Question

UnlockIAS · Accepted Answer

Correct — C, Service exports. In 2023-24 India ran a large deficit on goods trade but a large surplus on services. Services exports were about US$341 billion, giving a net services surplus of roughly US$163 billion, which — together with remittances — absorbed most of a merchandise trade deficit of about US$240 billion. The result was that India's current account deficit narrowed to about 0.7% of GDP in 2023-24, from 2.0% in 2022-23. Software and IT services, along with business and professional services, drove that surplus.

Why the other options are wrong — (a) Agricultural and allied exports are of the order of US$50 billion — a small slice of the trade account — and they actually declined in 2023-24 as export curbs on non-basmati rice, wheat and sugar stayed in force. Nowhere near enough to cushion a deficit of that size.  (b) Merchandise is the side that creates the problem, not the cushion: goods imports (crude oil, gold, electronics) exceeded goods exports through 2023-24, so the merchandise account was itself in deficit.  (d) Automobiles are a growing but small line item inside merchandise exports. Being part of the goods account, they are already netted into the merchandise deficit and cannot offset it.

Concept: India's external account has two halves. The merchandise (goods) account is chronically in deficit because of crude oil, gold and electronics imports. The invisibles — services, remittances and income — are in surplus, and services (IT/software, business and professional services) are the single biggest item there. Because the current account balance equals the balance of trade plus the balance of invisibles, a services surplus directly shrinks the overall external gap.

State PCS 2025 Q32 — Economy PYQ with Answer

State PCS 2025 Q32 — Economy PYQ with Answer