MCQ
External Sector MCQ - Practice Questions with Answers
Solve 87 External Sector questions for RAS/RPSC preparation.
Practice questions
Q1Consider the following statements regarding RBI's management of foreign exchange reserves: 1. RBI publishes half-yearly reports on management of foreign exchange reserves. 2. Foreign currency assets are maintained in major currencies and denominated in US dollar terms. 3. Movements in foreign currency assets occur mainly because of domestic GST collections. 4. Foreign currency assets are held as multi-currency assets in multi-asset portfolios. Which of the statements given above are correct?
Statements 1, 2 and 4 are correct. Statement 3 is incorrect because RBI attributes FCA movements mainly to purchase and sale of foreign exchange, income, aid receipts and revaluation.
Q2Consider the following statements regarding the current account in India's BoP statistics: 1. It distinguishes between a visible merchandise account and an invisibles non-merchandise account. 2. Invisibles are divided into services, transfers and income. 3. Current account transactions are broadly classified as goods, services, income and current transfers. 4. Goods under the current account exclude movable goods traded between residents and non-residents. Which of the statements given above are correct?
Statements 1, 2 and 3 are correct. Statement 4 is incorrect because goods generally cover movable goods exported to or imported from non-residents with change in ownership.
Q3Consider the following statements regarding restrictions under the Liberalised Remittance Scheme: 1. Remittance from India for margins or margin calls to overseas exchanges or overseas counterparties is not available under the scheme. 2. Remittance for trading in foreign exchange abroad is permitted under the scheme. 3. Capital account remittances to countries identified by FATF as non-cooperative countries and territories are not available under the scheme. 4. Providing PAN is optional for resident individuals sending outward remittances under LRS. Which of the statements given above are correct?
Statements 1 and 3 are correct because RBI's FAQ lists both as unavailable under LRS. Statement 2 is incorrect: remittance for trading in foreign exchange abroad is a prohibited item under the scheme. Statement 4 is incorrect because PAN is mandatory for LRS transactions through authorised persons.
Q4Consider the following statements regarding the treatment of reserves in India's balance of payments: 1. Movement in reserves is recorded in balance of payments statistics after excluding changes on account of valuation. 2. The overall balance in India's balance of payments is matched by an opposite entry in reserves. 3. Gold held as reserves is valued at 90 per cent of the average London market price of gold during the month. 4. The domestic currency component of an IMF quota subscription is 25 per cent and is termed the reserve position in the IMF. Which of the statements given above are correct?
Statements 1, 2 and 3 are correct. RBI states that reserve movement in BoP excludes valuation changes, that the overall balance is matched by an opposite reserve entry, and that gold is valued at 90 per cent of the average London market price. Statement 4 is incorrect: 25 per cent of an IMF quota is the foreign exchange component paid in SDRs or acceptable foreign currencies; the remaining 75 per cent is the domestic currency component.
Q5Consider the following statements regarding import-export rules under FTP 2023: 1. Exports and imports are free except when regulated by prohibition, restriction or exclusive trading through state trading enterprises. 2. IEC is a 10-character alpha-numeric number. 3. No export or import of goods shall be made without IEC unless specifically exempted. Which of the statements given above are correct?
All three statements are true. FTP 2023 states the general free policy subject to specified regulation, defines IEC as a 10-character alpha-numeric number, and makes IEC mandatory for goods export/import unless an exemption applies.
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6Consider the following statements about Importer-Exporter Code (IEC): 1. IEC is a 10-character alpha-numeric number allotted to an entity. 2. IEC is mandatory for undertaking any export or import activities unless specifically exempted. 3. IEC is always different from the Permanent Account Number (PAN). Which of the statements given above are correct?
7Consider the following statements regarding Foreign Trade Policy 2023: 1. It is a dynamic policy kept open-ended to accommodate emerging needs. 2. Its key approach includes Incentive to Remission and Export promotion through collaboration. 3. It excludes e-commerce exports and SCOMET policy from its emerging areas. 4. Revisions to the policy are to be done only after announcing a new Foreign Trade Policy. Which of the statements given above are correct?
8Consider the following statements about export/import policy status under FTP 2023: 1. Exports and imports are free except when regulated by prohibition, restriction or exclusive trading through State Trading Enterprises. 2. Restricted goods or services may be exported or imported only with authorisation/permission or as prescribed in notification/public notice. 3. Any person can claim an authorisation as a right from DGFT or the Regional Authority. Which of the statements given above are correct?
9Consider the following statements regarding international trade settlement in Indian rupees: 1. RBI allowed invoicing and payments for international trade in Indian rupees through its circular dated July 11, 2022. 2. Under the arrangement, exports and imports may be denominated and invoiced in rupees and the settlement shall take place in rupees. 3. The framework is applicable only to trade with Russia. 4. DGFT introduced a provision in the Foreign Trade Policy on September 16, 2022, to allow international trade settlement in Indian rupees. Which of the statements given above are correct?
10With reference to India's trade and pharmaceutical sector as noted in the Trade Watch Quarterly (Q4 FY2025-26), consider the following statements:\n1. India's total goods and services trade in FY2025-26 reached USD 2.5 trillion.\n2. India exported pharma and API products worth USD 35.8 billion in 2025, while global drug and API demand was estimated at around USD 1.3 trillion.\nWhich of the statements given above is/are correct?
11Consider the following statements regarding India's capital account in balance of payments compilation: 1. In India's BoP presentation, the financial account is termed the capital account. 2. Capital account data are compiled on the basis of returns filed with RBI by authorised dealers engaged in foreign exchange transactions. 3. Reporting by authorised dealers includes FDI, FII/ADR/GDR, ECBs/FCCBs, trade credit and NRI deposits. 4. Data on external assistance are obtained from authorised dealers rather than the Government of India. Which of the statements given above are correct?
12Consider the following statements about India's Balance of Payments (BoP): 1. BoP statistics summarise an economy's transactions with the rest of the world for a specific period. 2. In India, RBI is responsible for compilation and dissemination of BoP data. 3. Under the current account, transactions are classified only into capital inflows and capital outflows. Which of the statements given above are correct?
13Consider the following statements regarding Special Economic Zones in India: 1. Asia's first Export Processing Zone was set up at Kandla in 1965. 2. India's SEZ Policy was announced in April 2005. 3. The SEZ Act, 2005, supported by SEZ Rules, came into effect on February 10, 2006. 4. The SEZ Board of Approval is a 9-member inter-ministerial mechanism. Which of the statements given above are correct?
14Consider the following statements regarding foreign exchange reserves: 1. India's foreign exchange reserves comprise foreign currency assets, gold, special drawing rights and reserve tranche position in the IMF. 2. Reserve assets are external assets available to and controlled by monetary authorities for financing payments imbalances or exchange-market intervention. 3. Monetary gold is a reserve asset for which there is no outstanding financial liability. 4. Securities that do not satisfy the requirements of reserve assets are still included in reserve assets. Which of the statements given above are correct?
15Consider the following statements regarding India's textile and handicrafts exports for FY 2025-26 reported on April 22, 2026:\n1. Total exports rose 2.1 per cent year-on-year to ₹3,16,334.9 crore.\n2. Exports declined in over 120 destinations because of higher US reciprocal tariffs.\n3. UAE, Japan, Egypt and Sudan were among the standout high-growth destinations.\nWhich of the statements given above are correct?