Instructions

Directions for the next 4 questions: Answer these questions based on the table below:

The table shows trends in external transactions of Indian corporate sector during the period 1993-94 to 1997-98. In addition, following definitions hold good:

Sales, Imports, and Exports, respectively denote the sales, imports and exports in year i.

Deficit in year I, Deficit1 = Imports - Exports

Deficit Intensity in year I, DI = Deficit/Sales Growth rate of deficit intensity in year I, GDI = $$\frac{DI_i - DI_{i-1}}{DI_{i-1}}$$

Further, note that all imports are classified as either raw material or capital goods.

Trends in External Transactions of Indian Corporate Sector (All figures in %)

Question 22

The highest growth rate in deficit intensity was recorded in:

Solution

We know that growth rate in deficit intensity can be calculated as GDIi = (DIi — DI(i-1))/DI(i-1) , so in year 1994-95 we have GDI = (6.3-5.1)/5.1 = max out of all others .Hence option A.

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The highest growth rate in deficit intensity was recorded in:

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