Q1. India spent most of its foreign exchange reserves in 1977-78 for
(a) Import of chemicals and fertilisers
(b) Import of crude petroleum
(c) Import of newsprint
(d) Combating inflation
(UPSC Prelims 1979)
Answer: (b) Import of crude petroleum
Explanation: In 1977–78, a significant portion of India’s foreign exchange was used for importing crude oil, due to rising global prices and increased domestic demand. Petroleum imports have historically been a major drain on reserves.
Q2. India earns maximum foreign exchange by the export of which of the following commodities?
(a) Iron
(b) Tea
(c) Jute
(d) Sugar
(UPSC Prelims 1980)
Answer: (b) Tea
Explanation: Tea has historically been one of India’s top export commodities, earning significant foreign exchange. India is among the largest producers and exporters of tea, with major markets in Europe, Russia, and the Middle East.
Q3. The rupee exchange rate is currently linked with
(a) Pound Sterling
(b) Dollar
(c) Franc
(d) Basket of currencies
(UPSC Prelims 1984)
Answer: (d)
Explanation: In the early 1980s, India adopted a managed exchange rate system, linking the rupee to a basket of currencies to ensure stability and flexibility in international trade, rather than pegging it to a single currency.
Q4. India earns maximum foreign exchange from the export of
(a) Gems and jewellery
(b) Non-ferrous base metals
(c) Textile fabrics including cotton and man-made fibres
(d) Tea
(UPSC Prelims 1986)
Answer: (a) Gems and jewellery
Explanation: India’s largest foreign exchange earnings come from the export of gems and jewellery, due to its global dominance in diamond cutting and gold craftsmanship.