An Indian smartphone manufacturer faced higher production costs after the rupee depreciated during a period of rising electronic component import costs and elevated crude oil prices. Which Balance of Payments situation most likely caused this pressure on the rupee?
Solution
✅ Correct Option: 2
A **current account deficit** means the country is paying out more on imports and other current transactions than it is receiving. Higher crude oil and electronic-component imports raise demand for foreign currency and can put pressure on the rupee. **Option 1:** Better farm output is mainly a **domestic production** issue; it does not itself create this Balance of Payments pressure. **Option 3:** GST collections are part of the government's **fiscal revenue**, not the Balance of Payments. **Option 4:** Foreign investment enters the **capital/financial account** and usually brings foreign currency into India, which can support the rupee.
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