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UPSC 2011: Consider the following actions which the Government can take: 1. Devaluing the domestic currency. 2. Reduction in the export subsidy. 3. Adopting suitable policies which attract greater FDI and more funds from FIIs. Which of the above actions can help in reducing the current account deficit?
(a)1 and 2
(b)2 and 3
(c)3 only
(d)1 and 3
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Not attemptedCorrect Answer: (d) 1 and 3
Devaluing the rupee (1) makes exports cheaper and imports costlier, tending to narrow the trade gap and hence the current-account deficit. Attracting larger inflows of FDI/FII (3) supplies foreign exchange that can finance any remaining gap. Cutting export subsidies (2) would in fact hurt export competitiveness, so it would not help. Therefore, only 1 and 3 help reduce the current-account deficit. ([upscprep.com](https://www.upscprep.com/upsc-prelims-2011-gs-question-paper-and-answer-key/?utm_source=openai))
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Frequently Asked Questions
What is the correct answer to this UPSC 2011 Indian Economy question?▼
The correct answer is option (d): 1 and 3. Watch the detailed video explanation in our Sherlocking Prelims course on UnlockIAS.
Which year was this External Sector & Balance Of Payments question asked in UPSC Prelims?▼
This question was asked in UPSC CSE Prelims 2011, GS Paper 1, as Question 10. It falls under Indian Economy > External Sector & Balance Of Payments.
What is the difficulty level of this UPSC question?▼
This question is rated "moderate". It requires sound conceptual understanding of the topic.
How many UPSC Prelims questions have been asked from External Sector & Balance Of Payments?▼
UPSC has asked 49 questions from External Sector & Balance Of Payments (under Indian Economy) across multiple years. Visit the topic page to see the full list and year-wise trends.