During FY 2025‑26, India's exports of goods were Rs. 22 lakh crore and imports were Rs. 26 lakh crore. Calculate the balance of trade and state whether it is favorable or unfavorable.
Answer
Balance of trade = –Rs. 4 lakh crore; therefore it is an unfavorable balance.
The correct answer is Balance of trade = –Rs. 4 lakh crore; therefore it is an unfavorable balance. — Interpret the negative sign: a negative balance indicates imports exceed exports, i.e., an unfavorable trade balance.
Step-by-step solution
- Write the formula for balance of trade: Balance = Exports – Imports.
- Substitute the given values: 22 lakh crore – 26 lakh crore.
- Perform the subtraction: 22 – 26 = –4, so the balance is –4 lakh crore.
- Interpret the negative sign: a negative balance indicates imports exceed exports, i.e., an unfavorable trade balance.
Common mistake: Subtracting imports from exports incorrectly or ignoring the sign of the result.
Concept tested: Balance of trade
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