MCQ on Foreign Trade in India
Q1. Which of the following is the main objective of India’s Foreign Trade Policy?
a) To promote exports and reduce imports
b) To achieve a balance of trade surplus
c) To increase the share of India’s exports in world trade
d) To promote import substitution
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Correct Answer: c) To increase the share of India’s exports in world trade
Explanation: The main objective of India’s Foreign Trade Policy is to increase the share of India’s exports in world trade. This is done by promoting exports, facilitating imports, and creating a favorable environment for international trade.
Q2. Which of the following organizations regulates international trade?
a) World Bank
b) International Monetary Fund
c) World Trade Organization
d) United Nations Conference on Trade and Development
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Correct Answer: c) World Trade Organization
Explanation: The World Trade Organization (WTO) is the international organization that regulates international trade. It seeks to make international trade free by establishing rules and regulations for member countries.
Q3. Which of the following is not a primary product exported by India?
a) Textiles
b) Agricultural products
c) Pharmaceuticals
d) Minerals
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Correct Answer: c) Pharmaceuticals
Explanation: Primary products are raw materials and unprocessed goods. Pharmaceuticals are not primary products, as they are processed and manufactured goods. India’s primary product exports include textiles, agricultural products, and minerals.
Q4. Which of the following countries is India’s largest trading partner?
a) United States
b) China
c) United Arab Emirates
d) Saudi Arabia
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Correct Answer: b) China
Explanation: In 2020, India’s largest trading partner was China, with a partner share of 15.98 percent. India imported goods worth US$ 58,799 million from China.
Q5. What is the term used to describe the difference between a country’s exports and imports?
a) Balance of trade
b) Balance of payments
c) Current account balance
d) Trade deficit
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Correct Answer: a) Balance of trade
Explanation: The balance of trade is the difference between a country’s exports and imports. A positive balance of trade indicates a trade surplus, while a negative balance indicates a trade deficit.
Q6. Which of the following is a major reason for India’s unfavorable terms of trade?
a) High export of primary products
b) Low quality of Indian products
c) Export of residue products
d) All of the above
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Correct Answer: d) All of the above
Explanation: India’s unfavorable terms of trade are due to several factors, including the high export of primary products, low quality of Indian products, and export of residue products.
Q7. Which of the following is a component of India’s balance of payments?
a) Balance of trade
b) Foreign direct investment
c) Remittances
d) All of the above
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Correct Answer: d) All of the above
Explanation: The balance of payments includes all transactions involving the exchange of goods, services, and financial assets between residents of different countries. This includes the balance of trade, foreign direct investment, and remittances.
Q8. What was the main focus of India’s trade policy before the liberalization in 1991?
a) Export promotion
b) Import substitution
c) Free trade
d) Export diversification
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Correct Answer: b) Import substitution
Explanation: Before the liberalization in 1991, India’s trade policy focused on import substitution. This policy aimed to reduce imports by promoting domestic industries and self-reliance.
Q9. Which of the following is a non-tariff barrier used in international trade?
a) Import quotas
b) Export subsidies
c) Tariff rate quotas
d) Customs duties
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Correct Answer: a) Import quotas
Explanation: Import quotas are non-tariff barriers that restrict the quantity of a particular good that can be imported into a country. They are used to protect domestic industries from foreign competition.
Q10. What is the main purpose of the World Trade Organization (WTO)?
a) To provide financial assistance to developing countries
b) To regulate international trade and ensure free trade among member countries
c) To promote economic development through trade liberalization
d) To monitor and enforce trade agreements among member countries
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Correct Answer: b) To regulate international trade and ensure free trade among member countries
Explanation: The main purpose of the WTO is to regulate international trade and ensure free trade among its member countries. It does this by establishing rules and regulations for trade and resolving trade disputes among members.
Q11. Which of the following is a major challenge faced by India in international trade?
a) High tariffs on exports
b) Non-tariff barriers
c) Lack of infrastructure
d) All of the above
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Correct Answer: d) All of the above
Explanation: India faces several challenges in international trade, including high tariffs on exports, non-tariff barriers, and lack of infrastructure. These challenges hinder India’s ability to compete effectively in global markets.
Q12. Which of the following is a major advantage of international trade for India?
a) Access to new markets
b) Access to advanced technology
c) Access to foreign capital
d) All of the above
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Correct Answer: d) All of the above
Explanation: International trade offers several advantages for India, including access to new markets, advanced technology, and foreign capital. These benefits help India to grow its economy and improve its global competitiveness.
Q13. What is the main reason for India’s trade deficit?
a) High imports of primary products
b) High imports of capital goods
c) High imports of consumer goods
d) High imports of petroleum products
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Correct Answer: d) High imports of petroleum products
Explanation: India’s trade deficit is mainly due to high imports of petroleum products. These imports account for a significant portion of India’s total imports, leading to a trade deficit.
Q14. Which of the following is a major export destination for India?
a) United States
b) European Union
c) ASEAN countries
d) All of the above
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Correct Answer: d) All of the above
Explanation: Major export destinations for India include the United States, European Union, and ASEAN countries. These markets account for a significant share of India’s total exports.
Q15. What is the main objective of India’s export promotion policies?
a) To increase the volume of exports
b) To diversify export products
c) To diversify export markets
d) All of the above
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Correct Answer: d) All of the above
Explanation: The main objective of India’s export promotion policies is to increase the volume of exports, diversify export products, and diversify export markets. These policies aim to enhance India’s competitiveness in global markets and boost economic growth.
Q16. Which of the following is a major import item for India?
a) Textiles
b) Machinery
c) Pharmaceuticals
d) Agricultural products
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Correct Answer: b) Machinery
Explanation: Machinery is a major import item for India. Other major import items include crude petroleum, gold, and petroleum products.
Q17. Which of the following is a major government initiative aimed at promoting exports from India?
a) Export Promotion Councils (EPCs)
b) Special Economic Zones (SEZs)
c) Export-Import Bank of India (EXIM Bank)
d) All of the above
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Correct Answer: d) All of the above
Explanation: Export Promotion Councils (EPCs), Special Economic Zones (SEZs), and the Export-Import Bank of India (EXIM Bank) are all major government initiatives aimed at promoting exports from India. EPCs facilitate export promotion activities, SEZs provide a conducive environment for export-oriented industries, and the EXIM Bank provides financial assistance to exporters.
Q18. Which of the following is a major challenge faced by the Indian economy in terms of export competitiveness?
a) High export growth
b) Low export growth
c) High import growth
d) Low import growth
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Correct Answer: b) Low export growth
Explanation: A major challenge faced by the Indian economy in terms of export competitiveness is low export growth. Factors such as infrastructural bottlenecks, high transaction costs, and an unfavourable exchange rate can hamper the growth of exports and affect the country’s overall trade balance.
Q19. Which of the following is a major challenge faced by the Indian economy in terms of import dependence?
a) High import dependence
b) Low import dependence
c) High export dependence
d) Low export dependence
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Correct Answer: a) High import dependence
Explanation: A major challenge faced by the Indian economy in terms of import dependence is high import dependence. The country relies heavily on imports of essential items such as crude oil, electronic goods, and machinery, which can expose the economy to external shocks and affect its macroeconomic stability.
Q20. Which of the following is a major government initiative aimed at reducing India’s import dependence?
a) Make in India
b) Skill India
c) Digital India
d) Startup India
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Correct Answer: a) Make in India
Explanation: The Make in India initiative is a major government initiative aimed at reducing India’s import dependence by promoting domestic manufacturing and attracting foreign investment. Launched in 2014, the initiative seeks to boost domestic production, create employment opportunities, and enhance India’s competitiveness in the global market. By promoting the growth of the manufacturing sector, the Make in India initiative aims to reduce the country’s reliance on imports and improve its trade balance.