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Q65 (CDS-I/2025) Economy › External Sector & Trade › Balance of payments Answer Verified

Which of the following pairs is/are not correctly matched ? 1. Global Value Chains (GVC) : International Product Sharing 2. World Integrated Trade Solutions : Database on GVC related Trade 3. Current Account Deficit (CAD) : Foreign Direct Investment Select the answer using the code given below :

Result
Your answer: —  Â·  Correct: C
Explanation

Pair 1 is correctly matched as Global Value Chains (GVCs) refer to international production sharing where product activities are distributed across different countries [4]. Pair 2 is also correctly matched; the World Integrated Trade Solution (WITS) provides a comprehensive database for GVC-related trade indicators and harmonized data from sources like the World Bank and OECD [4]. Pair 3 is incorrectly matched. The Current Account Deficit (CAD) records trade in goods, services, and transfer payments [2]. Foreign Direct Investment (FDI) is a component of the Capital and Financial Account, not the Current Account [2]. While FDI can be used to finance a CAD, they are distinct accounting categories in the Balance of Payments framework. Therefore, only pair 3 is not correctly matched.

Sources

  1. [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > World Development Report > p. 527
  2. [4] https://wits.worldbank.org/gvc/global-value-chains.html
  3. [1] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 6: Open Economy Macroeconomics > 6.1.1 Current Account > p. 86
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