Mains Answer Writing - 10 Mar, 2026

GS3

Economy

15 marks

“Persistent Current Account Deficit (CAD) is not necessarily harmful for a developing economy like India, but its sustainability depends on the nature of capital inflows.”
Examine this statement in the context of India’s external sector.

Attempt Challenge on App See Model Answer

Tips for your answer

1. Start with Conceptual Clarity: Briefly explain Current Account Deficit within the framework of Balance of Payments and state why developing economies like India may run a CAD (high imports for growth, capital goods, energy needs).
2. Differentiate Types of Capital Inflows
Explain the difference between stable and volatile inflows:
- Long-term investments like Foreign Direct Investment (more stable)
- Short-term flows like Foreign Portfolio Investment (more volatile)
- Link this to the sustainability of CAD.
3. Conclude with Policy Perspective: Mention how institutions like the Reserve Bank of India maintain stability through forex reserves, exchange rate management, and policies to boost exports and reduce excessive import dependence.

9.5/15

Topper’s Answer Sheet

With detailed evaluation

More Challenges

View All

GS2
International Relations
10 Oct, 2026
Recent restrictions on H-1B visas by the United States have raised concerns for Indian professionals. Discuss their implications for India and suggest measures to address these challenges.
View Challenge
GS3
Environment & Ecology
Yesterday
The Living Planet Report highlights a sharp decline in wildlife populations worldwide. What does this decline actually indicate? Discuss the major causes of biodiversity loss and suggest conservation measures.
View Challenge
GS3
Economy
8 Oct, 2026
How does a repo rate hike help control inflation? Discuss its impact on the Indian economy.
View Challenge