BOT · BOP · Exchange Rate · FEMA · FDI/FPI/FII — SSC / Railway / UPSC / BPSC
Foreign Trade: Exchange of goods and services between two or more countries.
| Term | Condition |
|---|---|
| Trade Surplus | Exports > Imports |
| Trade Deficit | Exports < Imports |
| Top Export Destinations | Top Import Sources |
|---|---|
| 1. United States of America | 1. China |
| 2. United Arab Emirates | 2. Russia |
| 3. Netherlands | 3. United Arab Emirates |
| Top Exported Goods | Top Imported Goods |
|---|---|
| Engineering goods; petroleum products | Petroleum crude/products; electronic goods |
| Electronic goods; drugs/pharmaceuticals | Gold; machinery |
| Gems and jewellery | Coal/coke/briquettes |
A systematic record of all economic transactions between residents of a country and the rest of the world during a given period.
| Component | Details |
|---|---|
| Current Account | Goods, services, primary income, secondary income/current transfers (including remittances); closely linked with income, production, demand and employment |
| Capital Account | Conventional Indian capital/financial account: FDI, portfolio flows, external borrowings, banking capital, NRI deposits and other external assets/liabilities; these flows can affect the real economy |
Foreign exchange rate = price of one currency in terms of another; a hypothetical example is US$1 = ₹87.
Floating rate: primarily market-determined; authorities can still intervene in a managed float. Convertibility and floating are different concepts.
Deliberately reducing the value of one's own currency in terms of foreign currencies.
Liberal policy in relation to this, but rupee is not fully convertible on the capital account.
Facilitates foreign trade and payments.
Debt Trap: Taking another loan to pay off current debt obligations.
Cross-border investment intended to establish lasting interest and significant influence/control; generally 10% or more equity ownership under India's classification
Older FII, Sub-Account and QFI categories merged into the unified FPI regime from June 2014
| Sector | FDI Limit |
|---|---|
| Multi-brand retail | 51%; Government route, policy/state conditions |
| Single-brand retail | 100% |
| Telecom; Defence | Telecom 100% automatic; Defence up to 100%, automatic up to 74%, Government route beyond |
| Petroleum refining by PSUs | 49% automatic, subject to no disinvestment/dilution of domestic equity in existing PSU |
| Civil aviation | Airports 100% automatic; scheduled airlines up to 100%, automatic up to 49%, Government route beyond; category-specific conditions |
| Railway-related projects | 100% |
| Courier services and Insurance | 100% |
| Power exchange | 49% |
| Public sector banks | 20% |
| Private sector banks | 74% |
| Topic | Key Fact |
|---|---|
| Foreign Trade | Exchange of goods and services between two or more countries |
| Balance of Trade (BOT) | Only tangible goods | Trade Surplus: Exports > Imports | Trade Deficit: Exports < Imports |
| India's Top Trading Partners (2024–25) | USA, China, UAE (merchandise trade, FY 2024–25) |
| Top Export Destinations | USA, UAE, Netherlands |
| Top Import Sources | China, Russia, UAE |
| Top Exported Goods | Leading export groups: engineering goods, petroleum products, electronic goods, drugs/pharmaceuticals, gems/jewellery |
| Top Imported Goods | Leading import groups: petroleum crude/products, electronic goods, gold, machinery, coal/coke/briquettes |
| Foreign Trade Policy 2023 | Issued by Ministry of Commerce & Industry | Effective: 1 April 2023 |
| FTP 2023 Target | Exports of 2 Trillion USD by 2030 |
| Import Substitution Policy | Inward-looking Trade Strategy |
| Dumping | Exporting below normal value (normally comparable domestic price); prescribed below-cost cases can matter |
| BOP — Definition | Systematic record of all economic transactions between residents and rest of world |
| BOP Current Account | Goods + services + primary income + secondary income/current transfers |
| BOP Capital Account | Financial transactions | FDI, FII, ECB, Foreign Aid, NRI Deposits |
| Current Account Deficit | Current-account debits exceed credits; not merely goods imports versus exports |
| Twin Deficits | Current Account Deficit + Fiscal Deficit |
| Exchange Rate System in India | Managed exchange rate since 1993 | Based on market demand & supply | RBI intervenes |
| Currency Devaluation | Deliberately reducing own currency value | Imports costlier, Exports cheaper |
| Foreign Exchange Reserve Components | Foreign Currency Assets, gold, SDRs and IMF Reserve Tranche Position |
| Rupee Convertibility — Tarapore I | S.S. Tarapore Committee (I) — 1997 |
| Rupee Convertibility — Tarapore II | S.S. Tarapore Committee (II) — 2006 | Not fully convertible |
| FEMA | 1999 | Replaced FERA (1973) | Effective: 1 June 2000 |
| FDI — Greenfield | Development of new unit / infrastructure |
| FDI — Brownfield | Investment in an already existing unit |
| FDI Restrictions | Lottery, betting/gambling, chit funds, Nidhi, TDR trading, specified real-estate/farm-house business and tobacco manufacture, atomic energy, railway transport except permitted activities |
| FPI | Below 10% equity threshold; generally liquid and potentially volatile/reversible; not inherently unsafe |
| FII | Older FII category merged with Sub-Accounts and QFIs into FPI from June 2014 |
| Debt Trap | Taking another loan to pay off current debt obligations |
| Public Sector Banks FDI Limit | 20% |
| Private Sector Banks FDI Limit | 74% |