Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
4. Define trade deficit and current account deficit. What are the reasons for expanding trade and current account deficits of India? Examine its implications on the Indian economy. (250 words)
Difficulty level: Moderate
Reference: The Hindu
Why the question:
July’s provisional trade data should trigger early warning signals among policymakers, as the first year-on-year contraction in exports in 17 months, albeit marginal, and a 44% jump in imports, sharply widened the trade deficit to a third successive monthly record.
Key Demand of the question:
To write about the trade deficit and current account deficit, reasons for its increase and its impact on the Indian economy.
Directive word:
Examine – When asked to ‘Examine’, we must investigate the topic (content words) in detail, inspect it, investigate it and establish the key facts and issues related to the topic in question. While doing so we should explain why these facts and issues are important and their implications.
Structure of the answer:
Introduction:
Start by defining trade deficit and current account deficit.
Body:
Frist, write about the factors that have led to increasing trade deficit and current account deficit in the recent past.
Next, write impact increased trade deficit and current account deficit will have on the Indian economy. Substantiate with facts and examples.
Next, write about ways to mitigate impact of negative impact of increasing trade deficit and current account deficit.
Conclusion:
Conclude by writing a way forward.
