During the colonial period, part of India’s export surplus was used to pay for the import of invisible items. In the balance of payments, invisibles are mainly:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → services such as tourism, shipping or air transport, insurance and banking
Invisibles are items in the current account that are not visible goods. They are mainly services, such as tourism, transport by ship or air, insurance and banking.
Machinery, cloth and raw materials are goods, so they are visible items.
NCERT (2026-27): Glossary: “Invisibles – Various items enter in the current account of the balance of payments, some of which are not visible goods. Invisibles are mainly services, like tourism, transport by shipping or by airways, and financial services such as insurance and banking. They also include gifts sent abroad or received from abroad and private transfer of funds, government grants and interests, profits and dividends.” “1.5 Foreign Trade … The most important characteristic of India’s foreign trade throughout the colonial period was the generation of a large export surplus. But this surplus came at a huge cost to the country’s economy. Several essential commodities—food grains, clothes, kerosene etc. — were scarcely available in the domestic market. Furthermore, this export surplus did not result in any flow of gold or silver into India. Rather, this was used to make payments for the expenses incurred by an office set up by the colonial government in Britain, expenses on war, again fought by the British government, and the import of invisible items, all of which led to the drain of Indian wealth.” |