The correct answer is: India’s exports are less than its imports

A trade deficit occurs when a country imports more goods and services than it exports. In simpler terms, it spends more on foreign goods than it earns from selling its own goods and services internationally. This imbalance leads to a net outflow of money from the country. Option 1 accurately reflects this definition. Option 2 describes a balanced trade scenario, where exports and imports are equal, resulting in no deficit. Option 3 describes a trade surplus, the opposite of a deficit. Option 4 is unrealistic and incorrect; India, like most countries, continues to engage in both imports and exports.

Several factors contribute to India's trade deficit, including high demand for imported goods (especially crude oil and electronics), global economic conditions that affect demand for exports, and the competitiveness of Indian exports in the international market. Understanding the dynamics of imports and exports is crucial to analyzing a nation's economic health. A persistent trade deficit can have implications for the exchange rate, foreign reserves, and overall economic growth.