Mrunal Mains Airpod3-GSM3-Economy:

Intl Trade / BoP / WTO etc

Contents
30 Pre-requisite / Prologue (इसको पढ़ने से पहले पूवर् शरत �ा है) ................................................................... 54
30.11 How much asked in Mains......................................................................................................... 54
31 BoP: INTRO ......................................................................................................................................... 55
31.11 Current Account Deficit how to reduce? ................................................................................ 55
31.12 Export diversification.................................................................................................................. 57
31.12.1 challenges to export diversification ................................................................................. 57
31.13 Export competitiveness of India................................................................................................ 57
31.13.1 👜👜👜👜Budget-2022 Announcements to ⏬CAD .......................................................... 58
31.14 CAD ⬇→⬆Export→agri⬆ .............................................................................................. 58
31.14.1 🌽🌽🌽🌽🌽🌽Agri-Selling→Outside India →Agri Export Policy, 2018 ........................ 58
31.15 🍋🍋🍋🍋BoP → Current → Exports → SEZ ............................................................................. 59
31.15.1 SEZ: suggestion / Way forward ........................................................................................ 59
31.16 BoP→ Capital Account: FDI and FPI ...................................................................................... 60
31.16.1 FDI & FPI – Trend.............................................................................................................. 60
31.16.2 FPI Pros and Cons .............................................................................................................. 60
31.16.3 FDI Pros and Cons ............................................................................................................. 61
31.17 BoP→ Full Capital Account Convertibility (CAC) ............................................................... 62
31.11 💱💱⚔ Reverse Currency War (मुद्रा युद्ध) ................................................................................... 62
31.12 Fall of Rupee: Reasons and Remedies....................................................................................... 63
31.12.1 Fall of Rupee: Reasons........................................................................................................ 63
31.12.2 Fall of Rupee: Remedies / How to Fix .............................................................................. 63
31.12.3 💱💱💱 Dollar- the Global Currency & ”DE-Dollarization”? (वै��क-आर��त-मुद्रा) ..... 64
31.13 Globalisation leads to Economic Development- Does it?.................................................... 65
31.13.1 areas where globalisation helped economic development ........................................... 65
31.13.2 Areas where globalisation NOT helped economic development ................................ 66
32 3B: International Org & Agreements ................................................................................................ 67
32.11.1 IMF & World Bank – usual problems (उनके �ा वांधे चल रहे हे?) ...................................... 67
33 🌐🌐🌐🌐🌐 World Trade Organization: �व� �ापार सं गठन ................................................................. 67
33.11.1 🌐🌐🌐🌐⚔📯📯📯📯 WTO Disputes involving India ....................................................... 67
33.11.2 WTO epic fail (economics optional PYQ for GS-Practice).......................................... 68
33.11.3 🤝🤝🤝 � WTO’s Notable Agreements ....................................................................... 69
33.12 WTO Summit 2022 @Geneva outcomes ................................................................................. 70
33.13 WTO Fish Subsidies .................................................................................................................... 70
33.14 🤝🤝Trade Agreements Types: �ापार समझौते के प्रकार ................................................................... 71
33.15 India and free trade agreements – good/bad?......................................................................... 71

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 33.16 🌐🌐🌐🌐🌐Protectionism, Trade war: सं र�णवाद, �ापार युद्ध ....................................................... 72
33.17 International groupings .............................................................................................................. 73
33.17.1 Indo-Pacific Economic Framework ................................................................................. 73
33.17.2 I2U2: Middle Eastern / West Asian QUAD (2021-22) ................................................. 74
33.17.3 G7 2022 Summit at Germany ........................................................................................... 74
33.17.4 Minerals Security Partnership (MSP) .............................................................................. 74
34 Economy Summary of last 1 decade (2012-22) ............................................................................... 75
34.11 Mock Questions ........................................................................................................................... 76
34.11.1 Economics Optional Subject ke Handpicked PYQ for GS Mains Practice ................ 76
34.11.2 Mock Questions .................................................................................................................. 76

30 🎓🎓PRE-REQUISITE / PROLOGUE (इसको पढ़ने से पहले पूवर् शरत �ा है)

- Pre-requisite Already told in Mains Airpods-Handout#1. (पूवर् शरत म� पहले ही बता चुका �ँ )
- In the movie Dark Knight#3, when Ra's Al Ghul (Liam Neeson) tells Batman 'there are many
forms of immortality, Bruce.’- then, Public need to be aware about what happened in Dark
Knight#1. It’s not director Christopher Nolan’s responsibility to give flashback every time.

30.11HOW MUCH ASKED IN MAINS

Mrunal’s Economy: 6 Mains General Studies Paper-1-2-3 Remarks

Pillars (How many Marks)
2016 2017 2018 2019 2020 2021
💱💱3_Intl_Trade, BoP 25 0 30 0 15 15 Third lowest utility after
2_Budget, out of 6 pillars

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31 BOP: INTRO

- BoP is a systematic record of all economic transactions made between the residents and non-
residents of a country for a specific time period, usually a year. िकसी देश के �नवा�सयों और गैर-�नवा�सयों के
बीच िकए गए सभी आ�थक लेनदेन का एक �रकॉडर् है।

31.11CURRENT ACCOUNT DEFICIT HOW TO REDUCE?

⇒ A nation’s current account balance consists of visible and invisible components- given in above
chart.
⇒ Current Account Deficit occurs when the outflow of money under the current account
transactions gets bigger than the inflow of money. This can result in weakening of local currency
and balance of payment crisis.
⇒ While it is not possible to greatly change the income and transfer in short term.
⇒ So primary focus should be to ⬇reduce our imports and ⬆increase our exports.

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31.12EXPORT DIVERSIFICATION
Definition: Export diversification refers to the move from “traditional” to “non-traditional” exports.
/ increasing the variety of products that we are exporting
⇒ Agri- raw commodities → + + processed food.
⇒ Textile: Yarn/textile → + + ready-made garments.
⇒ Shoes: Leather → + + synthetic
⇒ Metal ore →+ + Railway engine and vehicles
⇒ Chemicals→+ + pharma drugs
⇒ Services: IT/BPO → + + e-learning.

31.12.1 challenges to export diversification

⇒ 😥😥Agri: SPS agreement. Food hygiene Ban by USA/EU. + Many things from Pillar4A food
processing industry.
⇒ Textile/shoes: market research consumer preferences of the foreign country is required
⇒ Mfg/Pharma: jugaad mentality of Indian entrepreneurs. Not investing enough money in research
development.
⇒ IT/BPO/Services: command over languages other than English e.g. Japanese French German
Spanish etc.
⇒ Governance, Infrastructure, Education and skill mein problems.

31.13EXPORT COMPETITIVENESS OF INDIA

Definition: It is the ability of a country to export more than its rival/ competitor countries in the
same product category. This is possible when our exported products are cheaper and or of better
quality compare to our rival competitor export countries. But, we face following problems:
⇒ 😥😥Not cheap: Bangladesh LDC bolke duty free quota free access in Europe→ Indian Textile
can’t compete in EU
⇒ China/S.Korea deliberately keeping the local currency undervalued / currency war. India not
doing this so our products do not appear cheap to foreigners.
⇒ China using prison forced labour → product will be cheaper than India.
⇒ 😥😥Not better quality: Tea bushes’ quality usually drop after 50 years. Tea gardens in Darjeeling
are about 80-100 years old. Vs Kenya/ SriLanka etc.
⇒ Prawn/ Fishes etc. Heavy-metal contamination.
⇒ Dairy: mastery over liquid products but not solid products unlike New Zealand.
⇒ Mfg/Pharma: jugaad mentality of Indian entrepreneurs. Not investing enough money in research
development.
⇒ Philippines Indonesia call-centre workers better fluency over English accent than Indians→
IT/BPO call centre service export competitiveness affected.

�Conclusion: Export diversification & competitiveness → increase jobs, GDP, economic growth,
protect local economy from external shocks. Need of the hour is to pursue it on war footing.

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31.13.1 👜👜👜👜Budget-2022 Announcements to ⏬CAD
⇒ ⏫ Customs duties on imported daily use items such as umbrellas, headphones, earphones,
loudspeakers, and imitation jewellery
⇒ ⬆Customs duty on Import Gold
⇒ ⏬Tax benefits given to Bizmen for buying imported capital goods machineries e.g. textile
machine, bulldozer, mining equipment etc. (So they'll be forced to buy India-made machines)
⇒ Banned the import of Drone except for defense and research development.
⇒ 68% Defense purchase will be made from India made products (earlier 58% last year).
⇒ Unblended fuel shall attract an additional differential excise duty of Rs. 2/ litre (To encourage
blending of bio-ethanol.) → 🤩🤩this will help ⏬ import of crude oil.

31.14CAD ⬇→⬆EXPORT→AGRI⬆
31.14.1 🌽🌽🌽🌽🌽🌽Agri-Selling→Outside India →Agri Export Policy, 2018
− Within Agriculture & Allied sector: largest exports of India (Value-wise)= Marine Products >
Basmati Rice > Spices > Buffalo Meat > Non-Basmati Rice > Sugar > Raw Cotton > Castor Oil >
Tea
− Indian Agri Export major export destinations = USA, Saudi Arabia, Iran, Nepal and Bangladesh
− 😰😰Challenge? India accounts for less than 5% of world Agriculture exports. We shd do
following:
⇒ Diversify our export basket e.g. Wild Herbs, Medicinal Plants, Aromatic Oils, Frozen vegetables;
Biscuits, Confectionery & Processed Food etc.
⇒ Diversify destinations e.g. Biscuits to Uganda, Nigeria, Kenya
⇒ Boost value added agricultural exports e.g cashew apple jams , flavoured / roasted cashew, etc.
instead of exporting raw cashew. (कृ �ष �नयार्त म� प्रस�रण द्वारा मू�वधर्न करना)
⇒ Help exporters with sanitary and phyto-sanitary (SPS) issues via APEDA, FSSAI and other
bodies. So their products are not banned by US/EU on the allegations of pesticide residue /
pathogen / fruit fly contamination. (अमे�रक� और यूरोपीय �ा� मानकों के चलते भारतीय खा�-उ�ाद के �नयार्त पर
प्र�तबं ध न लग जाए उसके �लए भारतीय सरकारी सं �ानों द्वारा भारतीय उद्य�मयों मदद द�गे।)
⇒ Focus on branding, packaging & marketing of Indian ethnic products e.g. canned Indian cuisine
like Sarson Da Saag, Agra petha, Hyderabadi biryani in overseas markets.
⇒ Focus on R&D for gluten free, fibre rich products to cater health conscious consumer overseas.
(�ा� के प्र�त जाग�क �वदेशी उपभो�ा को आक�षत करना)
⇒ Encourage private investments through Ease of doing biz. in export oriented activities: cold
storage, packaging, air cargo; Creation of Agri-start-up fund. (�नजी �नवेश को प्रो�ाहन, �ापार म� सुगमता)

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✍Conclusion? Thus, this policy will help integrating Indian agricultural products with the global
value chains and help doubling farmers’ income. (िकसान क� आय दोगुनी करने म� मदद)

31.15🍋🍋🍋🍋BOP → CURRENT → EXPORTS → SEZ

(Definition) Special Economic Zones (SEZ: �वशेष आ�थक �ेत्र) is a specifically demarcated area of India
which is deemed as foreign territory for the purpose of Tax laws and Trade laws. (भारत के कर कानून वहां
भारत के अ� प्रदेशों क� समान नहीं लागू होते। उ�� करो म� छू ट/�रयायत दी जाती है)
- 😥😥Bizman shifting factory elsewhere after tax holidays over.
- 😥😥Worker exploitation denial of EPFO, ESCI, social security and maternity benefitsetc.
- 😥😥Agriculture and forest land diverted= pollution control and food security.
- 😥😥 land acquisition problems→big size SEZ not developed, unlike China. Small-small sized SEZ
= economies of scale not possible.
- 😥😥Not generated enough export or jobs to their full potential.
- 😥😥 economic / tax policy uncertainty when different parties are ruling at union and state.

31.15.1 SEZ: suggestion / Way forward

⇒ Implement Baba Kalyani report
⇒ 👜👜👜👜Budget-2022: Development Enterprise and Services Hub (DESH) Bill, 2022 to replace the
existing SEZ law of 2005 with following features:
⇒ DESH hubs will focus to ⏫mfg & services for both domestic market and export market.
⇒ Single window clearance
⇒ Easy norms for voluntary liquidation / exit
⇒ Promote research & development
⇒ common infrastructure facilities
⇒ Input tax credit for indirect taxes – GST, Customs.
⇒ No exemptions for direct taxes in the draft bill: reasons 1) WTO rules 2) To ⬆ Tax:GDP

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�Conclusion: appreciable step by the government to create jobs, GDP and export.

31.16BOP→ CAPITAL ACCOUNT: FDI AND FPI

31.16.1 FDI & FPI – Trend

⇒ 2020: Corona- America quantitative easing, boom in IT-Pharma, Startup bubble→⬆ FPI and
FDI.
⇒ 2022: USA Fed Tapering, Russia Ukraine war global uncertainty, Startup bubble burst→ FPI
outflow. Slowdown in FDI growth.

31.16.2 FPI Pros and Cons

(Definition) FPI is a foreign entity registered @SEBI, and who buys upto 10% in equity / shares of an
Indian Company.
⇒ 🤩🤩 primary market : IPO, Bonds, G-Sec investment

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⇒ 🤩🤩 secondary market: provides liquidity to existing investors.
⇒ 🤩🤩increased availability of capital → factory expansion, jobs, GDP.
⇒ 😥😥 frequent entry and exit by USA quantitative easing and Fed Taper. → volatility in the Indian
financial market→ erosion of domestic investors savings.
⇒ 😥😥 Hot Money → weakening of local currency during FPI exit
⇒ 😥😥 FPI issuing participatory notes (P-Notes)→⬆ money laundering and terror finance.
⇒ 😰😰 Not paying enough taxes. Finance Minister try to increase surcharge → FPI exit
→sharemarket ⬇→ finance Minister forced to undo decision.
⇒ 😰😰a black swan event means an unprecedented unexpected extreme risk event e.g. 2007’s USA
sub-prime crisis. RBI report says that in the next black swan event, possibility of capital outflows
to the tune of $100 billion -around Rs 7,80,000 crore from India by FPIs.

31.16.3 FDI Pros and Cons

(Definition) FDI is the (more than 10% equity / share) investment made by a foreign entity into an
Indian company, with the objective to get involved in the management / production of that Indian
company. भारतीय कं पनी के सं चालन/ उ�ादन म� शा�मल होने के उद्दे� से 10% या उससे �ादा शेयर खरीदना (e.g. 2018:
Walmart-USA bought 77% stakes in Flipkart @$16 billion.)

⇒ 🤩🤩 ⬆Capital. More stable then FPI. Exchange rate stability.

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⇒ 🤩🤩Technological and managerial insights→ e-commerce (Walmart), re-insurance (Warren
Buffet), military defence etc. → Jobs, GDP, ⬆ export competitiveness.
⇒ 🤩🤩UAE, Singapore’s prosperity is by FDI.
⇒ 🤩🤩⬆ competition→ better customer services e.g. Vodafone vs BSNL.
⇒ 😥😥 Tax Avoidance e.g Vodafone-Hutch deal.
⇒ 😰😰Outflow in Current Account→dividend/profit.
⇒ 😥😥 significant chunk of FDI to India comes from Singapore & Mauritius. Hints to some Indians
may be doing round-tripping / money laundering / tax-evasion by misusing DTAA.
⇒ 😥😥 loss of Indian ownership. Possible re-entry of modern day economic colonisation / MNC
who exploit resources- environment, human. e.g. Gig workers.
⇒ 😥😥 Amazon accused of even restricting bathroom breaks of workers.
⇒ 😥😥 Facebook / Twitter: Data privacy, influencing election outcomes.
⇒ Add: Full Handout Pillar1D1- FDI in insurance sector Walle Pros + Cons.

�Conclusion: for GDP expansion we require more investment from both domestic and foreign
sources. While both FDI and FPI provide the capital, there are concerns regarding tax avoidance and
volatility. Need of the hour is to address those concerns while encouraging/liberalising the entry of
foreign investors.

31.17BOP→ FULL CAPITAL ACCOUNT CONVERTIBILITY (CAC)

(Definition) Full convertibility of rupee means India should permit unrestricted conversion of
Indian ₹ to foreign currency for both current account and capital account transactions. → more
FDI investment in India → NPA problem solved, new factories, jobs, GDP growth, rivers of honey
and milk will flow.
- 🤩🤩 Relaxed ECB = we can get cheap loans from foreign countries more easily.
- 😰😰 1) Full CAC resulted into 1997 crisis in East Asian “Tiger” economies. (HOW? Ref Full
Course)
- 😰😰2) Full CAC will catalyse/magnify the effect of -ve points of FDI and FPI, Fed Tapering etc.
given in previous section of this handout.
- Foundations of Indian economy (e.g. NPA, GDP, Fiscal Deficit, forex reserve) not yet strong
enough to permit Full CAC- as per SS Tarapore committee.

�Conclusion: challenges outweigh the benefits. Calibrated / graded / phased liberalization will be
better, compared to instant Full CAC.

31.11💱💱⚔ REVERSE CURRENCY WAR (मुद्रा युद्ध)

- Protectionism and currency war = outdated topics, already asked.
- Reverse currency war= new term/topic but in my opinion, this term not famous enough to get
asked UPSC yet. You can satisfy curiosity from my video lecture https://youtu.be/OFj-oz-DeQI

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31.12FALL OF RUPEE: REASONS AND REMEDIES

(DATA) In the last five years, Indian rupee has weakened / depreciated against dollar from $1= ₹65
(2017) to nearly ₹80 (2022).

31.12.1 Fall of Rupee: Reasons

Rupee weakens against dollar whenever the demand for Dollar outgrows the supply of dollars in
Indian forex market. Reasons:
- FPI tapering, Startup Bubble Burst, Ukraine War→ outflow of FPI
- Global inflation / geopolitical problems : raw material, oil, fertilizer became expensive to import.
- Protectionism, weak growth of exports.

31.12.2 Fall of Rupee: Remedies / How to Fix

- From the previous section- Copy paste all the points about
- how to reduce current account deficit,
- How to reduce imports,
- How to increase exports.
- RBI: ECB limit ⬆, sell dollars from its reserve,
- RBI Attract NRI deposits/FCNR by exempting it from CRR/SLR. Ref this Video for more:
https://youtu.be/KoiXkAreWoA
- RBI shd sign Currency Swap agreement with other nations’ Central banks

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- Govt shd sign free trade agreement with like-minded countries / groupings at earliest.
- Agreements to settle the trade balance in rupee or some currency other than Dollar e.g. Rupee-
Riyal agreement, Rupee-Rouble agreement. (https://www.youtube.com/watch?v=i8Cif3kCsr0 )
However critics argue that it is unlikely to make a significant difference since India has a trade
deficit with most such countries.
- RBI Rules / Govt’s Taxation Rules should be modified in such a manner that FPI can’t exit
quickly after investing in India. E.g. FEMA Amendment, Tobin Tax etc.

31.12.3 💱💱💱 Dollar- the Global Currency & ”DE-Dollarization”? (वै��क-आर��त-मुद्रा)

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⇒ Foreign exchange reserves of 150 nations- internal composition is: 55% US dollars, 30% euros,
2% Yuan (Renminbi, Chinese currency) and 13% Misc. other currencies. That shows majority of
the nations keep large % of their forex reserve in US dollar. �व� के �ादातर देशों के �वदेशी आर��त �न�ध
कोष म� ब�तायत �प से डॉलर मुद्रा म� इन पैसों को रखा जाता है।
⇒ Thus US dollar is presently the “Global Reserve Currency”. (डॉलर को वै��क-आर��त-मुद्रा माना जाता है।)
⇒ “de-dollarisation” = Attempts to ⏬ the domination of $ in forex reserve and in international
transactions. e.g. 2021: Russian Central Bank reduced dollar-denominated assets to 16% in its
forex reserve. (�वदेशी मुद्रा भं डार म� तथा अंतरार्��ीय लेनदेन म� अमरीक� डॉलर का प्रभु� कम करना)
⇒ Can Indian rupee become global reserve currency?
⇒ Ans. In a very long future yes if, India adopts full capital account convertibility, keeps inflation,
fiscal deficit, currency exchange rates under control and becomes a sizeable exporter and global
economic superpower. (�पया-मुद्रा ऐसा दजार् हा�सल कर�गी जब यिद पूँजी-खाते म� सं पूणर् �प से प�रवतर्नीयता दी जाए,
महँ गाई क़ाबू म� रहे, राजकोषीय घाटा क़ाबू म� रहे, मुद्रा �व�नमय दर क़ाबू म� रहे, और भारत एक बड़ा �नयार्तक और आ�थक महास�ा
बनकर िदखाए- तो िफर एसा हो सकता हे।)

31.13GLOBALISATION LEADS TO ECONOMIC DEVELOPMENT- DOES IT?

Globalisation Globalization is a process in which nations allow free flow of goods, services,
वै�ीकरण labour, capital investment, technology, ideas and innovations. व�ु, सेवाओं, श्रम,
पूंजी �नवेश, प्रौद्यो�गक�, और �वचारों नवाचारों के मु� प्रवाह क� प्रिक्रया को वै�ीकरण कहते ह�
Economic It measures the ⏫ in the production of goods and services in a country.
Growth (�सफर् उ�ादन म� बढ़ोतरी)
📐📐आ�थक वृ�द्ध
Economic It measures whether economic growth has resulted in improving the quality
Development- of life & the socioeconomic structure of the country? (जीवन �र म� सुधार)
📐📐+ 💊💊💊💊💊 Qualitative measurements such as UNDP’s HDI (Human Development
आ�थक �वकास Index), life expectancy, 🤰🤰gender- related indices, infant mortality,
�literacy etc.

31.13.1 🤩🤩areas where globalisation helped economic development

⇒ FDI (Capital + Technology) → insurance density, penetration
⇒ FDI/google/FB → internet, e-learning, software→ economic empowerment of weaker section
thru education, skill development, inspiration from foreign success stories / TED Talks etc.
⇒ Flipkart+ Walmart → MSME/ small traders able to sell their goods throughout India using
marketplace model.
⇒ MNC setup factories→jobs, GDP→ tax collection⬆→reinvestment in the health and
education.
⇒ Access to lifesaving medicines⬆ → life expectancy⬆

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⇒ MNC outsourcing of jobs to India-China-Asia→ Women LFPR⬆→eco development⬆

⇒ Western value system→ conservative attitude towards women/LGBT ⬇→ they are able to
participate in the economic activities more freely.

31.13.2 😰😰Areas where globalisation NOT helped economic development

⇒ poverty decreased in absolute figures but the inequality has increased. MSME / kiranawala /
brick mortar shops closing down.
⇒ Gig Economy →worker social security ⬇
⇒ MNC resource exploitation, mining activities, displacement of schedule Tribes
⇒ MNC : Tax avoidance, BEPS
⇒ MNC: while the availability of medicines increased but affordability of medicine is not
increasing, because first one pharma company is not willing to share the patent rights with 3rd
world. Health ⬇→Economic development⬇
⇒ FB/Google/Social Media: influencing the elections in 3rd world countries, spreading hatred/
communal disharmony / riots→affecting economic development.
⇒ globalisation → Western value system / nuclear family isolation depression suicide→ economic
development ⬇

🎓🎓PS: You can add more points from GSM1- globalization impact on Indian society by logically
connecting it with economic development. I am not writing a long essay here due to paucity of time
in space.

�Conclusion: in some areas, Globalization has catalysed the process of economic development, in
some areas it has hampered. Need of the hour is to ensure that equitable distribution of the fruits of
globalisation among the society- esp. lower strata of the society.

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32 3B: INTERNATIONAL ORG & AGREEMENTS
32.11.1 IMF & World Bank – usual problems (उनके �ा वांधे चल रहे हे?)
⇒ 😰😰They need to give more quantity of loans to poor countries after Corona but 1st world not
contributing enough.
⇒ 😰😰Trump & other critics demand China should get less loan/support from World Bank because
now China is not a very poor country
⇒ 😰😰Need Reforms in IMF SDR quota and voting pattern.
⇒ 😰😰Allegations that IMF Chief Kristalina Georgieva (who was previously CEO of World Bank)
had pressurized the World Bank staff to give better ranking to China in “Ease of doing Biz”
report.

33 🌐🌐🌐🌐🌐 WORLD TRADE ORGANIZATION: �व� �ापार सं गठन

33.11.1 🌐🌐🌐🌐⚔📯📯📯📯 WTO Disputes involving India

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33.11.2 WTO epic fail (economics optional PYQ for GS-Practice)
Discuss some controversial issues before the World Trade Organization. Do you think the rigid
and partial attitude of industrialized countries is the main hurdle in the way of reaching some
solution?
⇒ (Origin) Since 2013- Bali Summit’s Trade facilitation agreement→ no new groundbreaking
deals have occurred.
⇒ 2017- WTO Buenos Aires summit ended even without any joint declaration.
⇒ among the many reasons, one is the obtuse nature of first world countries.
⇒ not willing to conclude the Doha development agenda
⇒ not willing to address the food subsidy peace clause related issues
⇒ they want a bulldozer their own e-commerce priorities
⇒ protectionism was started by USA first.
⇒ in trade deals imposing their vision of labour laws and environment laws depending on how it
suits their domestic political narrative.
⇒ not willing to transfer the required funds and technology to 3rd world countries labour and
environment of regulations.
⇒ not want to acknowledge that they (1st world nations) have already progressed by leaving
subsidies to local industries and turning a blind eye to the pollution caused by local industry.
⇒ and India China also have right to progress by adopting the same path.
⇒ monetary policies of the first world countries also affect the currency exchange rates and thereby
adverse balance of trade. But neither the first world countries nor the WTO nor the IMF able to
fix this.

�Conclusion: need to address these problems for sustainable development of all the countries.
Otherwise world is again getting divided into multiple trade blocs.

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33.11.3 🤝🤝🤝 � WTO’s Notable Agreements

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33.12🐠🐠WTO SUMMIT 2022 @GENEVA OUTCOMES
⇒ Fish Subsidies: WTO’s Agreement on Fisheries Subsidies (AFS): to curb ‘harmful’ subsidies that
promote overfishing. This will help ⬆ Blue economy — sustainable use of ocean resources for
economic growth. 😥😥 but some apprehensions/ discontent among members (REF Next section).
⇒ Food procurement: If UN’s World Food Programme (WFP) buying food for humanitarian
purposes →will be exempted from any export / subsidy restrictions.
⇒ Suspension/Moratorium on customs duties on e-commerce extended until March 31, 2024.
⇒ Corona vaccines/medicines ke IPR/Patent pe temporary waiver without the consent of the patent
holder for 5 years. So that 3rd world nations can more easily manufacture Corona
vaccines/medicines domestically.
⇒ We’ll setup a well-functioning dispute settlement system by 2024. Presently deadlock due to
Judges vacancies / appointment issues caused by Ex-President Trump.
⇒ Above is around 100 words note. Elaborate, give background, add linkages with inflation, food
security, SDG goals to drag it till 250 words.

33.13🐠🐠WTO FISH SUBSIDIES

WTO’s Agreement on Fisheries Subsidies (AFS) signed in WTO Sumit/ Ministerial Conference 2022
at Geneva. AFS prohibits three kinds of subsidies:
⇒ ✋🚨🚨(1) illegal, unreported, or unregulated (IUU) fishing
⇒ ✋🚨🚨(2) fishing of already over-exploited species/stocks
⇒ ✋🚨🚨(3) fishing on unregulated high seas.
However, India wants special and differential treatment (S&DT).
⇒ 🤔🤔India wants transition period for phasing out subsidies type#1 and type2 within their
Exclusive Economic Zone (EEZ).
⇒ 🤔🤔 Foreign countries’ fish subsidies contribute to over-fishing. India wants stricter action on
them. E.g.
⇒ Size of Fisheries subsidies 1) India $277 million in 2018 (2) Whereas China, EU, US, South
Korea, and Japan’s subsidies are more than $2000 million respectively. So, India wants them to
stop first.

�Conclusion: SDG Goal 14.6 requires countries to stop overfishing. WTO taken an appreciable
step with this new agreement but - 🤔🤔India has set a target of exporting marine products worth $14
billion by 2025. This fisheries subsidies restrictions could create obstacles. Third world country
should be given differential treatment. First action must be taken on the countries that have already
contributed a lot in overfishing.
(�व� �ापार सं गठन का म�ोद्योग स��डी पर समझौता �जसम� तीन िक़� क� स��डी पर प्र�तबं ध लगाने क� बात है तािक समं दर म�
मछ�लयों के �वनाश को रोका जा सके और अंतररा��ीय �ापार बाधाओं को कम िकया जा सके । हालाँिक भारत चाहता है िक हम� थोड़ी अलग
�रयायत� दी जाए। पर स��डी म� कमी करने क� समयाव�ध को लं बा िकया जाए।)

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33.14🤝🤝TRADE AGREEMENTS TYPES: �ापार समझौते के प्रकार

33.15🤝🤝INDIA AND FREE TRADE AGREEMENTS – GOOD/BAD?

1. 🤩🤩Successfully signed with Australia and UAE in 2022. (For More Refer to Full Handout /
FREE Win23 series)
2. 😰😰Big but poor mentality. Not willing to open up domestic market for partner country to
protect the farmers and MSME.

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3. 😰😰Inverted duty structure problem / partner country benefited more than India from FTAs.
More growth on import side than on exports. (Although Economic Survey disagrees)
4. 😰😰Disagreements over data localisation norms, Labour laws and environmental regulation.
5. 😰😰Critiques allege that most of India’s FTAs have not worked in “India’s favour.” e.g. India’s
FTA with S.Korea, Japan and Sri Lanka= %⬆in imports >> are higher than %⬆ of exports.
REASONS?
a. 😥😥 lack of skilled manpower & innovation in India. (कौशल यु� मानवबल तथा नवाचार क� कमी)
b. 😥😥 Electricity, transport, infrastructure problems (�बजली प�रवहन बु�नयादी सु�वधाओं क� कमी)
c. 😰😰 loan interest rate high for small businessmen (छोटे उद्योगप�तयों के �लए कज़र् लेना महँ गा)
6. 😰😰South Asian Free Trade Area (SAFTA) Full potential not achieved because of geopolitical
acrimony among India Pakistan and neighbouring countries.
7. 😰😰Post-BREXIT: British businessman keen to have trade agreement with India to improve their
exports. Some progress was under way during Prime Minister Boris Johnson visit but now
Britain in political turmoil. India may have to sit on the negotiation table again with the new
prime minister of UK.

33.16🌐🌐🌐🌐🌐PROTECTIONISM, TRADE WAR: सं र�णवाद, �ापार युद्ध

- President Trump’s era: protectionism / trade war reached its peak.

- During protectionism, some of the Indian exports benefited (see above chart), while some
suffered (textile, chemical, IT/BPO, etc).
- Post Corona: countries again started to become inward looking to promote the local industries
through cheap loans and subsidies / Atma-Nirbhar.

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- 1st world nations’ local industrial groups keep pressuring their governments to impose more
tariffs on Indian fisheries, textile and pharma sectors.
I feel this topic is outdated for 2022/23. So, this much background enough for some answer writing
for other Qs.

33.17🤝🤝INTERNATIONAL GROUPINGS

- Most of them proved to be not so effective preventing the Russia Ukraine crisis / Chinese
hegemony.
- Concerns over global tax agreement, data localization etc.
- Russia Ukraine crisis → security oriented groupings in limelight (E.g. AUKUS, NATO) rather
than economic oriented groupings.

33.17.1 🤝🤝Indo-Pacific Economic Framework

⇒ Intro-Origin: 2022- USA launched it on the sidelines of QUAD Summit in Tokyo, Japan.
⇒ not a traditional trade agreement.
⇒ Has modules for Trade resilience, Supply chains, Climate and infrastructure, Anti-corruption
and transparency.
⇒ USA launched IPEF because 1) Trump pulled out of TPP11. Biden need to make friends again 2)
Counter RCEP, Belt-Road. 3) ⏫influence over Asia.
⇒ India signed it but problems:
⇒ 1) Labour, environment standards, stand on GM crops.

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⇒ 2) Myanmar not allowed to join due to its military regime. Later on USA could make some rules
imposing their vision of democracy / Myanmar-relationship on the member countries.
⇒ 3) Anti-corruption / transparency / religious freedoms : ke baare mein USA government reports
tend to project India in a poor light.
⇒ Conclusion: IPEF can prove to be a catalyst for furthering India's economic interests in the Indo
Pacific region. provided that aforementioned challenges are nipped in the bud.

33.17.2 🤝🤝I2U2: Middle Eastern / West Asian QUAD (2021-22)

⇒ Indo-Pacific Quad = India, USA, Japan and Australia
⇒ Middle Eastern Quad / / West Asian QUAD = India Israel, UAE, and USA
⇒ six areas for joint action: water, energy, transport, space, health, and food security.
⇒ countering the influence of Chinese belt and Road initiative in Middle East.
⇒ $2 billion to develop a series of integrated food parks across India → 2x farmers’ income.
⇒ 300-megawatt hybrid (Solar+Wind) renewable energy project in Gujarat → help to India’s goal
of 500 GW of renewable energy by 2030.
⇒ Better implementation of the Abraham accords and other peace initiatives in Middle East.
Peaceful and prosperous Middle East = market for Indian Exports.

33.17.3 🤝🤝G7 2022 Summit at Germany

G7 + India+ some countries signed two documents
- (1) ‘Resilient Democracies Statement’ - for guarding the freedom, independence and diversity of
civil society actors” and “protecting the freedom of expression and opinion online and offline”.
- (2) “Joining Forces to Accelerate Clean and Just Transition towards Climate Neutrality”

33.17.4 🤝🤝Minerals Security Partnership (MSP)

⇒ US-led partnership to secure critical minerals and reducing dependency on China.
⇒ 🤔🤔MSP includes Australia, Canada, Finland, France, Germany, Japan, the Republic of Korea,
Sweden, United Kingdom, and the European Commission.
⇒ 🤩🤩 Cobalt, Nickel, Lithium etc. Required for batteries used in electric vehicles, semiconductors
and high-end electronics manufacturing.
⇒ 🤩🤩 Rare Earth Minerals available in India — such as lanthanum, cerium, neodymium,
praseodymium, samarium, etc.
⇒ 😥😥 Rare Earth Minerals NOT available in India- dysprosium, terbium, and europium. Hence,
there is a dependence on countries such as China.
⇒ 😥😥 India not invited to MSP grouping is because the India does not bring any expertise to the
table.
⇒ Whereas, Australia and Canada have rare earth mineral reserves. Japan has the technology to
process Rare earth minerals. So they’re invited to MSP.
�Conclusion: both for improving usage of clean energy and for decreasing current account deficit
we need to be part of some arrangement for rare earth minerals. MSP membership could greatly help
in this regard.

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34 ECONOMY SUMMARY OF LAST 1 DECADE (2012-22)
WTO Formed Sun 1 Jan
1995
WTO Doha Development Agenda 2001
South Asian Free Trade Area (SAFTA) 2004
WTO Peace clause on Food Subsidies/ Bali Summit 2013
BRICS NDB Bank, AIIB Bank formed. 2014,2015
Sovereign Gold Bond, Gold Monetization 2015
India's foreign trade policy 2015
HELP Policy (hydrocarbon) 2016
ECB Liberalized 2016
Indian Pakistan given membership of Shanghai cooperation Organisation 2017
Trade War / Protectionism by Trump-USA begins. 2018
IFSC Authority 2019
BREXIT → afterwards 2021: India-UK Roadmap agreement to negotiate FTA Fri 31 Jan
and Navy cooperation 2020
⇒ RCEP 15 Nations signed, India did not 2020
⇒ D10 club for 5G Cooperation. China not invited.
☪🤝🤝🤝🤝Abraham Accords UAE, Bahrain and Israel’s Peace agreement
India to have current account surplus for the first time! 2020-21
एसा पहेली बार �आ है, 17-18 सालो म�!
- AUKUS: trilateral security pact between Australia, the United Kingdom 2021
- I2U2: Middle Eastern QUAD
- WTO Geneva Summit, Fisheries Subsidies Agreement 2022
- India-Australia Economic Cooperation and Trade Agreement (ECTA)
- India-UAE CEPA
- Indo-Pacific Economic Framework by USA
- 😰😰 Russia Ukraine war, Fed Tapering, economic crisis in Sri Lanka.
The last 10 years, economic survey has observed the following:
⇒ 2012: Precautionary tone on ECB. Next global crisis will be because of corporate borrowing. But
later years a “necessary evil?” because Rate cutes not reflected. TBS: banks reluctant to lend.
Corporate Bond market not deepened.
⇒ 2013: Twin deficit. RBI should have $750 billion Forex for soft & Hard diplomacy. → Dr.Rajan
$300_ → Dr.Patel →$400 : Shaktikanta → 600+ billion (2021)
⇒ 2014: gold restrictions lifted. FDI in insurance, Defense. Apprehensive of TPP, TATIP, RCEP,
International trade environment: world slowly moving towards “ Protectionism ”.

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⇒ 2015: FTAs benefitted partners >> India: Need to shed our “Big but poor dilemma.“ -
Reciprocity in opening market for agriculture & ICT
⇒ 2016: OPEC oil cut deal.Protectionism. Impact of Trump election on Indian economy-Will hurt
China mfg >> Indian services.
⇒ 2017-22: nothing remarkable in ES observations- just the usual import/export data.
⇒ 2020-21: India to have current account surplus for the first time!
⇒ 2021-22: 😥😥 commodity prices, Global liquidity (US Fed Tapering) are challenges. But, we have
accumulated enough forex reserve to handle any crisis after USA Fed Tapering.
⇒ 👜👜👜👜Budget-2022: special economic zones to be replaced with a new act, 68% Atma Nirbhar in
Defense, higher excise duty on unblended fuel. ⬆tax on imported Chinese goods.

34.11�MOCK QUESTIONS

34.11.1 �Economics Optional Subject ke Handpicked PYQ for GS Mains Practice

1. Do you agree with the view that globalization itself leads to economic development? Give
reasons for you answer.
2. Compare the role of Foreign Direct Investment (FDI) and Foreign Institutional Investment
(FII’s) in India’s economic development. Are FDI’s preferable to Portfolio Investments?
Evaluate.
3. Examine the challenges to export diversification and increase in export competitiveness of India.
4. Has WTO helped the developing countries as was professed at the time of its establishment?
Give reasons for your answer with reference to the Indian economy.
5. Do you subscribe to the view that WTO stipulations are heavily loaded against the economic
interests of the developing countries? What are the options for these countries in the emerging
scenario to cope with various challenges on this count? Elaborate your answer.
6. Discuss some controversial issues before the World Trade Organization. Do you think the rigid
and partial attitude of industrialized countries is the main hurdle in the way of reaching some
solution?
7. “Partial capital account convertibility cannot serve the purpose of integrating Indian economy
with global economy”. Analyse critically.

34.11.2 �Mock Questions

Most of these model answers are already covered in my full length lectures and special classes: so
kindly go through it
1. GSM3-2015: Craze for gold in Indians have led to a surge in import of gold in recent years and
put pressure on balance of payments and external value of rupee. In view of this, examine the
merits of Gold Monetization Scheme. �णर् मुद्रीकरण योजना क� खू�बयों क� जांच कर�।
2. GSM3-2015: There is a clear acknowledgement that Special Economic Zones (SEZs) are a tool of
industrial development, manufacturing and exports. Recognizing this potential, the whole
instrumentality of SEZs requires augmentation. Discuss the issues plaguing the success of SEZs

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 with respect to taxation, governing laws and administration. �वशेष आ�थक �ेत्र के �वकास म� कराधान, शासी
कानूनों और प्रशासन के सं बं धीत मुद्दों क� चचार् करे।
3. GSM3-2016: Justify the need for FDI for the development of the Indian economy. Why there is
gap between Memorandum of Understanding (MOU) signed and actual FDIs? Suggest remedial
steps to be taken for increasing actual FDIs in India. एमओयू / पर ह�ा�र िकए गए और वा��वक एफडीआई
के बीच अंतर �ों है? भारत म� वा��वक एफडीआई बढ़ाने के �लए सुधारा�क कदम उठाए जाने का सुझाव िदया।
4. GSM3-2014: Foreign direct investment in the defence sector is now said to be liberalised. What
influence this is expected to have on Indian defence and economy in the short and long run?
भारतीय र�ा �ेत्र म� �वदेशी प्र�� �नवेश उदारीकरण से भारतीय अथर्�व�ा पर लघु और दीघार्व�ध म� �ा प्रभाव होंने क� उ�ीद है?
5. GSM3-13: Discuss the impact of FDI entry into multi-trade retail sector on supply chain
management in commodity trade pattern of the economy. ब�-�ापार खुदरा �ेत्र म� एफडीआई प्रवेश से
कमोिडटी �ापार क� आपू�त श्रृंखला प्रबं धन पर �ा असर होगी?
6. GSM3-2013: Though India allowed Foreign Direct Investment (FDI) in what is called Multi
Brand Retail through joint venture route in September 2012, the FDI even after a year, has not
picked up. Discuss the reasons. म�ी ब्रांड �रटेल म� �वदेशी प्र�� �नवेश को अनुम�त �मलने के बाद भी वा��वक �प से
�नवेश �ों नहीं आ रहा है?
7. GSM2-2014: Though 100% FDI already allowed in non-news media like a trade publication and
general entertainment channel, the Government is mulling over the proposal for increased FDI
in news media for quite some time. What difference would an increase in FDI make? Critically
evaluate the pros and cons. समाचार मीिडया म� �वदेशी प्र�� �नवेश बढ़ाने के फायदे और नुकसान क� समी�ा।
8. Discuss the importance of membership to Shanghai Cooperation Organisation (शं घाई सहयोग सं गठन)
in furthering India's interests in the Central Asian region.
9. Why has India refused to sign the Osaka declaration-2019 on cross-border data flow? (भारत ने
सीमा पार डेटा प्रवाह पर ओसाका घोषणा-2019 पर ह�ा�र करने से इनकार �ों कर िदया है?)
10. “Concerns for the domestic industry has prevented India from joining RCEP agreement.”
Comment. "घरेलू उद्योगो क� �चंता ने भारत को आरसीईपी समझौते म� शा�मल होने से रोक िदया है।" िट�णी करे.
11. Is India’s decision to stay out of the RCEP agreement appropriate? Examine critically. �ा
आरसीईपी समझौते से बाहर रहने का भारत का �नणर्य उ�चत है? गं भीर�प से समी�ा क��जए.
12. In 2018, the 25th Anniversary of ASEAN-India Dialogue Relations was commemorated under
the theme of "Shared Values, Common Destiny ”. In what areas do India and ASEAN nations
share common values and common destiny? साझा मू�, समान भा� िकन �ेत्रों म�?
13. "The USA-China and USA-EU trade wars present new sets of threats and opportunities for
India." Examine. �ापार युद्ध ने भारत के �लए नए खतरे और नए अवसर पैदा क�ए है
14. (GSM3-2018) How would the recent phenomenon of protectionism and currency manipulations
in world trade affect macroeconomic stability of India? �व� �ापार म� सं र�णवाद और मुद्रा जोड़तोड़ क�
हा�लया घटना भारत क� �ापक आ�थक ��रता को कै से प्रभा�वत करेगी?
15. (GSM2-2018) What are the key areas of reform if the WTO has to survive in the present context
of ‘Trade War’, especially keeping in mind the interest of India? यिद �व� �ापार सं गठन को '�ापार युद्ध' म�
बचकर रहना है तो �ा प्रमुख सुधार करने होंगे? �वशेष �प से भारत के िहत को �ान म� रखते चचार् क��जए।
16. (GSM2-2014) The aim of Information Technology Agreements (ITAs) is to lower all taxes and
tariffs on information technology products by signatories to zero. What impact should such
agreements have on India’s interests? सूचना प्रौद्यो�गक� समझौतों से भारत के िहतों पर �ा प्रभाव होना चािहए?

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17. (GSM2-2014) WTO is an important international institution where decisions taken affect
countries in profound manner. What is the mandate of WTO and how binding are their
decisions? Critically analyse India’s stand on the latest round of talks on Food security. �व� �ापार
सं गठन का जनादेश �ा है और उनके फै सले िकतने बा�कारी ह�? खाद्य सुर�ा पर नवीनतम दौर क� वातार् म� भारत के �ख का गं भीर
�प से �व�ेषण कर�।
18. (GSM2-2014) India has recently signed to become founding a New Development Bank (NDB)
and also the Asian Infrastructure Investment Bank (AIIB). How will the role of the two Banks be
different? Discuss the significance of these two Banks for India. दोनों ब�कों क� भू�मका अलग कै से होगी?
भारत के �लए इन दोनों ब�कों के मह� पर चचार् कर�।
19. (GSM2-2013) The World Bank and the IMF, collectively known as the Bretton Woods
Institutions, are the two inter-governmental pillars supporting the structure of the world’s
economic and financial order. Superficially, the World Bank and the IMF exhibit many common
characteristics, yet their role, functions and mandate are distinctly different. Elucidate. सतही तौर
पर, �व� ब�क और आईएमएफ़ कई सामा� �वशेषताओं को प्रद�शत करते ह�, िफर भी उनक� भू�मका, कायर् और जनादेश अलग-
अलग ह�। �� क��जए
20. (GSM2-2020) ‘Quadrilateral Security Dialogue (Quad)’ is transforming itself into a trade bloc
from a military alliance, in present times - Discuss. ('चतुभुर्जीय सुर�ा सं वाद (�ाड)' वतर्मान समय म� �यं को
सै�नक गठबं धन से एक �ापा�रक गुट म� �पा��रत कर रहा है - �ववेचना क��जए) – Solved in free Sp. class
21. (GSM2-2021) Critically examine the aims and objectives of SCO. What importance does it hold
for India? [एस. सी. ओ. के ल�ों और उद्दे�ों का �व�ेषणा�क प�र�ण क��जए। भारत के �लए इसका �ा मह� है ?]
22. (GSM2-2021) The newly tri-nation partnership AUKUS is aimed at countering China’s
ambitions in the Indo-Pacific region. Is it going to supersede the existing partnerships in the
region? Discuss the strength and impact of AUKUS in the present scenario. [भारत-प्रशांत महासागर �ेत्र
म� चीन क� मह�ाकां�ाओं का मुकाबला करना नई �त्र-रा�� AUKUS का उद्दे� है। �ा यह इस �ेत्र म� मौजूदा साझेदारी का �ान
लेने जा रहा है ? वतर्मान प�र�� म�, AUKUS क� श�� और प्रभाव क� �ववेचना क��जए।]

Next Handout: Economy Pillar4A- Agriculture

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