3.3.1 External sector notes

1. 3.3.1.1Balance of payments: current and capital accounts, CAD and India's BoP

   The balance of payments records every economic transaction between residents of India and the rest of the world in a year; the current account deficit (CAD) shows how much of the country's spending abroad is financed by foreign capital.

   Advanced · 7 min · Full course
2. 3.3.1.2Exchange rates: fixed, floating and managed systems, NEER/REER, PPP and rupee convertibility

   The exchange rate is the price of one currency in another; India moved from a fixed peg to a market-determined, RBI-managed float after 1991, with full convertibility on the current account but not on the capital account.

   Advanced · 7 min · Full course
3. 3.3.1.3Foreign exchange reserves and Special Drawing Rights

   India's foreign exchange reserves, held by the RBI, are mostly foreign currency assets plus gold, SDRs and the IMF reserve tranche, and they stand above US$ 700 billion; the SDR is the IMF's reserve asset, not a currency you can spend.

   Advanced · 6 min · Full course
4. 3.3.1.4Foreign investment: FEMA, FDI, FPI and instruments (ADR, GDR, masala bonds, P-notes)

   Foreign investment in India comes as FDI (lasting stake and control) or FPI (financial holdings, below 10%), is governed by FEMA, 1999, and flows through the automatic route or the government approval route.

   Advanced · 7 min · Full course
5. 3.3.1.5External debt, remittances and NRI deposit schemes

   India's external debt stood at US$ 762.8 billion at end-March 2026 (20.8% of GDP), while remittances of over US$ 100 billion a year, the highest in the world, and NRI deposits help finance the current account.

   Advanced · 6 min · Full course
6. 3.3.1.6India's foreign trade: composition, direction, Foreign Trade Policy 2023 and rupee trade settlement

   India runs a large goods trade deficit, offset by a services surplus; trade policy has moved from import substitution to export promotion, with Foreign Trade Policy 2023 as a continuing framework and rupee settlement as a newer tool.

   Advanced · 7 min · Full course
7. 3.3.1.7Trade remedies and regional trade agreements: anti-dumping, FTAs, CEPAs and customs unions

   Trade remedies protect domestic industry from unfair or sudden imports, while FTAs and regional blocs lower tariffs among partners; India recently concluded or signed major agreements with the UAE, Australia, EFTA, the UK and the EU.

   Advanced · 7 min · Full course
8. 3.3.1.8GATT and WTO: structure, principles, rounds and ministerial conferences

   The GATT (1947) was a treaty on tariffs that grew through eight rounds into the World Trade Organization on 1 January 1995, a permanent body with a binding dispute system, although its Ministerial Conference at Yaoundé in March 2026 ended without agreement.

   Advanced · 7 min · Full course
9. 3.3.1.9WTO agreements: Agreement on Agriculture (boxes, peace clause) and TRIPS

   The WTO Agreement on Agriculture sorts farm subsidies into coloured boxes and caps the trade-distorting ones, and TRIPS sets minimum global standards for intellectual property such as 20-year patents.

   Advanced · 8 min · Full course
10. 3.3.1.10IMF: quotas, SDRs and lending facilities

    The IMF, born at Bretton Woods in 1944, monitors the global monetary system and lends to members in balance of payments trouble, with a country's quota deciding its capital contribution, votes and borrowing limit.

    Advanced · 6 min · Full course
11. 3.3.1.11World Bank Group and other development banks: ADB, AIIB and NDB

    The World Bank Group has five institutions that finance development and reduce risk; the ADB, AIIB and NDB are regional or new-bloc banks that add finance for infrastructure, and India is a member of all three.

    Advanced · 7 min · Full course

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