Mrunal’s Win23 Economy Updates Pillar-3: Balance of Payment

International Trade, WTO-IMF etc

GET Past lecture & handout: https://Mrunal.org/win23
Contents
30 �🎖🎖Pillar#3A: Balance of Payment (भुगतान सं तुलन)...................................................................................... 98
30.1.1 Where is 2022-23’s Data BoP? .......................................................................................................... 98
30.2 �🎖🎖 Current Account ............................................................................................................................... 99
30.2.1 �🎖🎖 Notable Import / Export Goods as per �ES23 ................................................................. 99
30.2.2 Top Agri exports:................................................................................................................................. 99
30.2.3 ��India’s trade partners: Import / Export as per �ES23.................................................... 99
30.2.4 �🎖🎖 Indian migrants’ key destinations - �ES23 ....................................................................100
30.2.1 � Remittance: Side-topic → Pravasi Bharatiya Diwas (PBD) ................................................100
30.2.1 Import: ��� Crude Oil prices ..............................................................................................100
30.2.2 Import: �� Price cap Russian oil (2022)................................................................................100
30.2.3 Import: Lab Grown Diamonds (LGD: प्रयोगशाला म� बनाए गए हीरे) .....................................................101
30.2.4 Export: Unity Mall for GI, Handicraft etc. in �Budget-2023 .................................................101
31 Export: Foreign Trade Policy 2023 ..............................................................................................................101
31.1 4 pillars of FTP-2023 ..................................................................................................................................102
31.2 FTP-2023 Pillar#1: Incentive to Remission (टे� माफ़� ) .........................................................................102
31.2.1 FTP-2023 Pillar#2: Ease of Doing Biz (�ापार म� सुगमता) ..................................................................103
31.2.2 FTP-2023 Pillar3: Emerging Areas (उभरते �ेत्र) ...............................................................................103
31.2.3 FTP-2023 Pillar4: Collaboration of Stakeholders (िहतधारकों का सहयोग) .........................................104
31.2.4 �Conclusion (Summarise - yes it’ll greatly help) ..........................................................................105
31.2.5 �ES23 observation on Export Improvement ................................................................105
Export:�
31.2.6 Current Account Deficit ...................................................................................................................106
32 Capital Account: FDI and FPI .......................................................................................................................106
🗃🗃🗃🗃🗃🗃🗃🗃 Foreign Direct Investment (FDI: प्र�� �वदेशी �नवेश) .......................................................................106
32.1.1 🗃🗃🗃🗃🗃🗃🗃🗃 FDI in India → Source Nation and sector-wise as per �ES23.............................107
32.1.1 ��� International Financial Services Centre (IFSC) ......................................................107
32.2 �Budget-2023 on IFSCA Authority .....................................................................................................107
32.2.1 Foreign University @ Gift City ........................................................................................................107
32.2.2 Data Embassy @Gift city in �Budget-2023 ................................................................................108
32.3 External Debt : currency wise as per �ES23 ........................................................................................108
32.4 � � External Debt : Composition Govt vs Pvt. As per ES23 ..........................................................108
32.5 � � BoP → Capital Account → Misc. Concept: NIIP ...................................................................108
32.5.1 � � Asset liability ratio ..............................................................................................................109
32.6 �🎖🎖: 🗃🗃�
� BoP → summing up..........................................................................................................109
32.7 �� RBI’s Forex Reserve: �वदेशी मुद्रा �रजवर् .............................................................................................109
32.7.1 Significance of Foreign Exchange Reserves (मह�) ........................................................................110
33 � Pillar3B: Currency Exchange Rate: मुद्रा �व�नमय दर ..................................................................................111
33.1 Fall of Indian ₹ & Remedies ......................................................................................................................111
33.1.1 Challenges to India’s BOP by ES22 and ES23 ...............................................................................111

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 96

 33.1.2 RBI-Govt’s measures to prevent fall of Rupee (2022-Jul-Aug) ...................................................112
33.1.3 �� � ₹ Convertibility → RBI reforms (2004-2019) .........................................................113
33.1.4 �� � FEMA Rules for Indian resident’s overseas investment (2022-Aug)....................113
33.2 � FCRA Act .............................................................................................................................................113
33.2.1 FCRA on donations...........................................................................................................................113
33.2.2 FCRA on remittance .........................................................................................................................114
33.2.3 Rupee Rouble Agreement.................................................................................................................114
33.2.4 Nostro Vostro Accounts- settlements with Russia and SriLanka ..............................................115
33.2.5 Internationalisation of Indian rupee (भारतीय �पये का अंतररा�ी� यकरण ) ..............................................115
33.3 ��IMF Special Drawing Rights (SDR: �वशेष आहरण अ�धकार) ..........................................................116
33.3.1 ��IMF SDR Formula weightage reforms 2022 .....................................................................116
33.4 �� Misc. Concepts: Quantitative Easing and Federal Tapering ...................................................117
33.5 � Exchange Rate → Miscellaneous Terminologies ............................................................................117
33.5.1 � NEER and REER? (Hindi not imp because only prelim relevant) ......................................117
34 ��
��Pillar #3C: Intl. Organizations ....................................................................................................119
34.1.1 ��
��World Bank President? .................................................................................................119
34.1.2 ��
���IMF bailout loans to Pakistan (2019) and SriLanka (2022) ..............................120
35 ��
�� World Trade Organization: �व� �ापार सं गठन .............................................................................120
35.1.1 � � WTO Summits after 2015..................................................................................................120
35.2 WTO Summit 2022 @Geneva→ Notable Outcomes ............................................................................120
35.3 WTO Fish Subsidies (म� स��डी पर समझौता) .............................................................................................121
35.4 � Conventional Gravity Model (पारंप�रक गु��ाकषर्ण मॉडल) ....................................................................122
35.5 Free Trade Agreements in Recent Times ................................................................................................122
35.5.1 �FTA: India UAE CEPA, and India Australia ECTA...............................................................122
35.5.2 Interim (early harvest) trade agreement (शादी से पहेले सगाई) ...........................................................123
35.6 ��
��Indo-Pacific Economic Framework (IPEF) .........................................................................123
35.6.1 Why FTA increasing as per �ES23..............................................................................................124
35.7 International grouping ...............................................................................................................................124
35.7.1 G20 2023 Summit theme and logo ..................................................................................................125
35.7.2 ��
��Minerals Security Partnership (MSP: अ�त मह�पूणर् ख�नजों के �लए भागीदारी/सहयोग) ........125
36 ��MRUNAL’S ECONOMY COURSE FOR UPSC ............................................................................125
37 ��MRUNAL’S Monthly Current Magazine ........................................................................................126
38 What is already covered in Past: 3AB ...........................................................................................................126
38.1.1 Win20: already covered Following in 3AB ....................................................................................127
38.1.2 Win21: already covered Following in 3AB ....................................................................................129
38.1.3 Win22: already covered Following in 3AB ....................................................................................129

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 97

30 ⛽🎖🎖PILLAR#3A: BALANCE OF PAYMENT (भुगतान सं तुलन)
Economy: 6 Prelims P1 (GS 100 🔠🔠❓MCQs) Mains GSM-1-2-3 (750 Marks)
Remarks
PillarsTM 2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022
Among 6 pillars, Third
💱💱3_Intl_Trade, 4 4 7 7 2 4 0 30 0 15 15 0 lowest utility after
BoP Pill2_Budget.

30.1.1 📊📊Where is 2022-23’s Data BoP?

⇒ Financial Year will end on 31/3/2023
⇒ Then RBI will publish BOP in 2023-June, after fixing errors/omissions.

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 98

⇒ Economic Survey 2023 (published on 31/Jan/23) only published partial BoP data from April to
Sept/Dec-2022, which is not very useful for PYQ/MCQs. So we will focus on the general trend
but not EXACT numbers.
- if I have not mentioned the data in a particular segment= means latest economic survey 2023
has not bothered to talk about it loudly, so I’ve not bothered to do self-google search. अगर िकसी
भाग म� म�ने लेटे� डाटा नहीं िदया तो मतलब िक इकनो�मक सव� ने उसे बताने क� जहमत नहीं क�.

30.2 ⛽🎖🎖 CURRENT ACCOUNT

30.2.1 ⛽🎖🎖 Notable Import / Export Goods as per 📙📙ES23

NOTABLE EXPORTS
Goods Petroleum products e.g. Naphtha
Bitumen,Lubricants,Wax, etc), gems &
jewellery, organic & inorganic chemicals,
drugs & pharmaceuticals
Services Telecommunications, computer and
information services, transport, travel,
financial services, financial services
NOTABLE IMPORTS
Crude oil, electronic goods; coal,
machinery, gold, chemicals
Business services, transport, travel,
fees paid for using intellectual
property (e.g. drug patents)

30.2.2 Top Agri exports:

🐠🐠 (1)Marine Products, (2) NON-Basmati Rice (3) Spices, (4) Sugar, (5) Buffalo Meat, (6) Basmati-
Rice, (7) Cotton, (8) Wheat, (9) Castor Oil, (10) Misc. Processed Food

🚩🚩🚩FAQ: Why not given Top-10, why gave only important names? Ans. Feel free to sort data
from Statistical Appendix of Eco Survey:
https://www.indiabudget.gov.in/economicsurvey/doc/Statistical-Appendix-in-English.pdf poor cost
benefit making top-10 list, apply logic/guesswork/skip.

30.2.3 🛒🛒🛒🛒India’s trade partners: Import / Export as per 📙📙ES23

Top Destination of Indian Exports
(भारत के कु ल �नयार्त म� �ादातर िह�ा)
1. USA
2. UAE
3. Netherland
Other notable partners: Bangladesh, Hong
Kong, Singapore, Netherlands, Britain,
Belgium, Germany
Top Sources of Indian Import
(भारत के कु ल आयात का �ादातर िह�ा)
1. China
2. UAE (Gold, Crude Oil)
3. USA
Other notable partners: Saudi, Iraq,
Switzerland, Hong Kong (Diamonds) ,
Indonesia (due to Palm Oil) , Singapore , South
Korea

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 99

30.2.4 ⛽🎖🎖 Indian migrants’ key destinations - 📙📙ES23
BEFORE (पहेले इधर �ादा NOWADAYS (आजकल प्रवासी मज़दू र इन देशों म�
जाते थे) �ादा जाते है)
Destination Gulf nations USA,UK, East Asia,Singapore, Japan,
Australia, New Zealand
Type of low-skilled, informally high-skilled jobs in high-income
jobs employment countries

30.2.1 💌💌 Remittance: Side-topic → Pravasi Bharatiya Diwas (PBD)

1915 9th January: Gandhi-ji returned from S.Africa to Bombay (India).
2003 NDA-I (PM Vajpayee) decides to celebrate Pravasi Bharatiya divas (PBD) annually every
9th January. First summit @New Delhi. Presently organized by Ministry of External Affairs
2022 just a small scale video conference type of event.
भ� रंगारंग कायर्क्रम नही िकया, �ोिक वो तो हर दू सरे साल करते है।
2023 @Indore, Madhya Pradesh. The theme is "Diaspora: Reliable partners for India's progress
in Amrit Kaal”.

30.2.1 Import: ⛽📈📈📈📈 Crude Oil prices

What factors affect supply demand prices of oil / gold = covered in full length course.

30.2.2 Import: ⛽💰💰 Price cap Russian oil (2022)

⇒ 2022-G7 group of nations (Canada, France, Germany, Italy, Japan, United Kingdom, United
States) agreed to cap the price of Russian oil to reduce Russia's ability to finance its war on
Ukraine. (�सी क�े तेल क� मह�म खरीद क�मत पर सीमाएं लगाई।)
⇒ India rejected this proposal. 2023: however, India managed to save only $2 per barrel even after
Russia’s ‘deep discounts’, due to cost of transportation and cargo-insurance. (हालांिक वा�व म� ब�त
स�ा �मला नहीं है- प�रवहन और बीमा खचर् के चलते.)

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 100
30.2.3 Import: 💎💎Lab Grown Diamonds (LGD: प्रयोगशाला म� बनाए गए हीरे)
��NATURAL DIAMONDS (प्राकृ �तक ��LAB GROWN
/कु दरती) DIAMONDS (LGD)
Formation Formed in the Earth’s mantle with high Grown in a laboratory using
temperature and pressure. advanced technology
Production Time billions of years Weeks
Chemical & Physical Pure carbon in a crystalline form, very Same as natural diamonds
Properties hard, very high refractive index
Cost Very Expensive Less expensive than Natural
Ethics and Deforestation, child labour in African More ethical and sustainable
environment mines (खनन के �लए वृ� छे दन, बाल मजदू री ) (नै�तक और िटकाऊ।)
�Budget-2023: (1) we’ll promote LGD, its seeds, its machinery- via tax cuts and subsidies. (2) we’ll
give grant to an IIT for LGD research and development.

30.2.4 Export: 🏬🏬🛒🛒 Unity Mall for GI, Handicraft etc. in 👛👛Budget-2023
⇒ Union to give loans to States to set up a Unity Mall in their state capital / best tourist city /
financial capital. (एकता / यू�नटी मॉल बनाने के �लए क� द्र और रा� को कजार् देगा)
⇒ Unity mall be sell State’s ODOPs (one district, one product), GI products, handicraft products.
Even other states’ products will be sold @Unity mall.

31 📦📦 EXPORT: FOREIGN TRADE POLICY 2023

⇒ (Origin) FTP-2023 Replaces the Foreign Trade Policy 2015. Boss? Commerce Ministry
⇒ Target: increase India’s exports from present $750–760 billion to $2 trillion by 2030.

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 101
31.1 4 PILLARS OF FTP-2023

1. Incentive to Remission (e.g. RODTEP, EPCG, Advance Authorisation etc)

2. Ease of doing business, reduction in transaction cost and e-initiatives
3. Emerging Areas – E-Commerce Developing Districts as Export Hubs and streamlining
SCOMET policy.
4. Export promotion through collaboration - Exporters, States, Districts, Indian Embassies abroad

31.2 FTP-2023 PILLAR#1: INCENTIVE TO REMISSION (टे� माफ़� )

We are already running the schemes. We will continue them and make them better.

Remission Scheme Description

RODTEP Remission of Duties and Taxes on Exported Products (RODTEP) to
provide refunds to exporters for various taxes paid on inputs.
EPCG Export Promotion capital Goods Scheme: 0% Customs duty import of
(आया�तत मशीनरी पर टै� capital goods (machinery) for export production. FTP2023: Will give
माफ़� ) some extra benefits to Textile factories in PM MITRA Parks, Dairy,
Green Hydrogen, Battery Electric Vehicles (BEV), Vertical Farming
equipment, Wastewater Treatment, Rainwater harvesting system.
Advance Authorisation 0% customs on import of raw materials for manufacturing export items.
Scheme (AAS) (आया�तत
क�े माल पर टै� माफ़� )

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 102
कु ल �मलाकर उ� सभी योजनाओं म� �नयार्तक को अपने क�े माल, मशीनरी इ�ािद पर जो टै� भरने होते ह� उसम� छू ट दी जाती है
�FAQ: Isn’t RODTEP and AAS overlapping with each other? Ans. They’ve internal technical rules
ki if imported item is raw material then AAS but if imported item is not raw material but required for
production, then RODTEP.

31.2.1 FTP-2023 Pillar#2: Ease of Doing Biz (�ापार म� सुगमता)

One-time Amnesty Scheme on Default on Export Obligations (�नयार्त दा�य�ों म� चूक पर राज�मा)

31.2.1.1 EoD: Bol Bachchan/ �चकनी चुपड़ी बाते

⇒ Our policy is based on principles of ‘trust’ and ‘partnership’ with exporters.
⇒ we’ll take feedback from Industry to update FTP, from time to time.
⇒ Process Re-Engineering and Automation, paperless, online environment, Reduction in fee
structures, eliminating the need for manual interface. (कागज रिहत ऑनलाइन प्रणाली, पं जीकरण फ़�स म�
कटौती, उद्योगजगत से सुझाव लेके �व�ास व भागीदारी/सहयोग से काम कर�गे।)
�FAQ: what does about things mean? How does it work?? Ans. NOTIMP. Whatever few fancy
key words, you can remember → write them in Mains.

31.2.2 FTP-2023 Pillar3: Emerging Areas (उभरते �ेत्र)

FTP-2023 will focus on emerging areas such as SCOMET, Dual Use goods, E-Commerce and
Merchanting Trade.

31.2.2.1 SCOMET & Dual use Export

⇒ SCOMET = Special Chemicals, Organisms, Materials, Equipment and Technologies. (�वशेष रसायन,
जीव, सामग्री, उपकरण और प्रौद्यो�गिकयां)
⇒ Dual-use High end goods e.g. night vision/thermal scanner, drones etc. (दोहरे उपयोग के सामान)
⇒ FTP-2023: we’ll promote their export.

31.2.2.2 E-Commerce Exports

⇒ Integration of Courier and Postal exporters with ICEGATE portal of CBIC. (ICEGATE portal is
for import-export related documents/clearance/taxes)

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 103
⇒ outreach and training activities for rural artisans, weavers, garment manufacturers, gems-
jewellery designers to help them export via E-Commerce platforms (ग्रामीण बुनकरों, कारीगरों, ज़ोहरीओ
को ऑनलाइन-�ापार �ेटफ़ामर्/क��नयो के साथ जोड़�गे, तािक वे भी अपना माल देश-द�ु नया को बेच सके । )

31.2.2.3 Merchanting trade @Gift City (वा�ण��क �ापार)

⇒ (Definition) when a company buys goods from one country and then sells them to a buyer in
another country without bringing the goods into their own country.
⇒ It’s essentially acting as a middleman in the international trade of goods. e.g. Companies Dubai,
Singapore and Hong Kong. FTP-2023 will promote this in GIFT city IFSC.

31.2.3 FTP-2023 Pillar4: Collaboration of Stakeholders (िहतधारकों का सहयोग)

stakeholder How to use them for export promotion?
District We’ll develop Districts as Export Hubs (DEH). With help of One
(हर �ज़ले से एक उ�ाद का �नयार्त) District One Product (ODOP) scheme.
Town Four new towns, namely Faridabad, Mirzapur, Moradabad, and
(शहरों म� �नयार्त के �लए बु�नयादी Varanasi, designated as Towns of Export Excellence (TEE), in
अवसं रचना का �नमार्ण) addition to the existing 39 towns. Government will give them first
priority for funding to develop export infrastructure e.g.
warehouse, ports etc.
Indian mission/embassy we’ll give them funding under Market Access Initiative (MAI) to
abroad (�वदेशी ग्राहकों क� do research/survey of Country specific customer
पसं द/नापसं द का सव��ण दू तावासो likes/dislikes/product preferences.
द्वारा करवाय�गे)
�:� � Exporters exporters will be given Star rating/Status based on export
(पुराने/अनुभवी �नयार्तक नौ�स�खयों को performance. 2Star/higher exporters will give training/mentoring
तालीम द�गे) to new/fresh exporters.

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 104
31.2.4 ✍Conclusion (Summarise - yes it’ll greatly help)
Thus, with tax relief, ease of doing business, collaboration with stakeholders and focus on the new
emerging areas such as e-commerce and SCOMAT - the FTP-2023 will greatly help in export
promotion, job creation and GDP improvement for India during the AMRIT KAAL. (इस प्रकार, कर
राहत, �ापार करने म� आसानी, िहतधारकों के साथ सहयोग और ई-कॉमसर् और �ॉमेट जैसे नए उभरते �ेत्रों पर ज़ोर देकर एफ़टीपी-
२०२३ नी�त भारत के अमृत काल म� रोज़गार सृजन, �नयार्त वृ�द्ध व आ�थक वृ�द्ध म� काफ़� मदद करेगी।)

31.2.5 Export:📙📙ES23 observation on Export Improvement

Reforms to improve India's Exports as per �ES23
⇒ Reduce the time/cost of logistics/transport (प�रवहन का समय/ खचर् कम करो।)
⇒ Sign more Free Trade Agreements (FTA: More in pillar3C-WTO) (मु� �ापार समझौते करो।)
⇒ Diversify the export destination. Focus towards the consumers in Africa, S.America, Central Asia
etc. (�नयार्त ल� �ानों म� �व�वधता लाएं ।)
Competitors to India’s exports- as per �ES23:
⇒ Bangladesh & Vietnam giving tough competition to Indian Textile
⇒ Vietnam: machinery and equipment; computers, electronic products, certain agriculture
products etc. giving tough competition to Indian exporters.
⇒ However, India will win eventually in the race due to 1) Younger workers 2) Large scale
production with big geography and big worker base. (भारतीय �नयार्त को बां�ादेश और �वयतनाम ट�र / कड़ी
�धार् दे रहे ह�। हालाँिक दीघार्व�ध म� भारत ने ही जीतना है, �ोंिक हमारे पास �ादा नौजवान मज़दू र ह� और बड़े पैमाने पर उ�ादन)
करते ह�।

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 105
31.2.6 Current Account Deficit
Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020-21 2021-22 2022-23
CAD as - - - - - - - - - +0.9% CAD CAD
% of 4.3% 4.8% 1.7% 1.3% 1.1% 0.6% 1.8% 2.1% 0.9% (Reality) DEFICIT DEFICIT
GDP possible. possible.
#
1.2% 3._%#

32 CAPITAL ACCOUNT: FDI AND FPI

🗃🗃🗃🗃 Foreign Portfolio Investors 🗃🗃🗃🗃🗃🗃🗃🗃 Foreign Direct Investment (FDI:

(FPI: �वदेशी पोटर्फो�लयो �नवेशक)
⇒ It is a foreign entity registered @SEBI, and
who buys upto 10% in equity / shares of an
Indian Company. [For Corporate Bonds and
G-Sec these % are different.]
⇒ FPI can be in debt (bond) or in equity
प्र�� �वदेशी �नवेश)
⇒ 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.)
⇒ ONLY in equity (Share)

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 106
32.1.1 🗃🗃🗃🗃🗃🗃🗃🗃 FDI in India → Source Nation and sector-wise as per 📙📙ES23
Sector wise Nation Wise
1. �Computer Software & Hardware 1. Singapore
2. Services Sector 2. Mauritius
3. Trading 3. UAE
4. USA

32.1.1 🐯🐯�🦁🦁 International Financial Services Centre (IFSC)

32.2 👛👛BUDGET-2023 ON IFSCA AUTHORITY

⇒ We’ll give more powers to IFSCA Authority. This will help reducing problem of dual regulation
between IFSCA Authority vs other (State/Union) Authorities under SEZ Act. (�नयं त्रण के �थर् दोहराव
को रोकने के �लए आईएफएससी सं �ा क� श��यों म� बढ़ोतरी कर�ग)े
⇒ We’ll setup a single window IT portal for Banks’/NBFCs’ registration to IFSCA, SEZ authorities,
GSTN, RBI, SEBI and IRDAI. (पं जीकरण के �लए एकल आईटी �खड़क� का �नमार्ण)

32.2.1 🏫🏫Foreign University @ Gift City

⇒ 2023: Deakin University (Australia) has become the 1st foreign university to to set up an
International Branch Campus (IBC) in GIFT City, Gujarat.

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 107
⇒ Such foreign Uni in GIFT city will not be regulated by India’s University Grants Commission
(UGC). They’ll be regulted by IFSC Authority.

32.2.2 Data Embassy @Gift city in 👛👛Budget-2023

⇒ A data embassy is a place where a country stores its important data in a secure location in
another country
⇒ Benefit? To protect sensitive data from disasters or cyber-attacks.
⇒ It's like having a backup of your important information in a safe place outside your home or
office.
⇒ 👛👛Budget-2023: we’ll encourage setting up Data Embassy @Gift city.

32.3 EXTERNAL DEBT : CURRENCY WISE AS PER 📙📙ES23

EXTERNAL DEBT REPAYMENT DENOMINATED IN (%)
US Dollar 55.5%
Indian Rupee 30.2%
Other Currencies 14.3%
Total 100%

32.4 � 🔪🔪 EXTERNAL DEBT : COMPOSITION GOVT VS PVT. AS PER ES23

TYPE OF EXTERNAL DEBT AMOUNT (IN BILLIONS OF % OUT OF
US DOLLARS) TOTAL
Sovereign External Debt $124.5 20.4%
Non-Sovereign External Debt (or external $486.0 79.6%
commercial borrowing)
Total External Debt $610.5 100%

32.5 � 🔪🔪 BOP → CAPITAL ACCOUNT → MISC. CONCEPT: NIIP

 Net International Investment Position (NIIP)= value of overseas assets owned by a nation minus
the value of domestic assets owned by foreigners.
⇒ � Positive NIIP value = creditor nation (लेनदार रा��)
⇒ � Negative value = debtor nation (कजर्दार देश). USA highest, India at 8th place (in 2018)
CATEGORY BILLION $ AS PER �ES23
Sr1. Indian residents’ overseas financial assets (+) 847.5
Sr2. Foreigners’ investment in India (minus) 1,237.1
Net claims of non-residents on India = Sr1-Sr2 (minus) 389.6
Note that the result is negative, indicating that non-residents have a net claim on India.

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 108
32.5.1 � 🔪🔪 Asset liability ratio
⇒ In above table divide sr1/sr2 = 69% = It is less than <100%
⇒ Means India has lesser foreign assets (847) compared to liability of India towards foreigners
(1237).

32.6 ⛽🎖🎖: 🗃🗃🤲🤲 BOP → SUMMING UP

Sr. Approx Bn. USD 2018-19 😷😷2020-21 2022: Apr-Dec

1 Current Account Deficit: चालू खाता घाटा - 57 +24 -67
2 Capital Account Surplus: पूंजी खाता + 54 +64 (+) 53
अ�धशेष
3 Errors & Omissions: त्रुिटयां और चूक -0.486 -0.3 -0.1
4 Overall Balance: समग्र सं तुलन/ शेष (-) 3 bn +87 (+) 14
5 Official Reserve Transactions or (+) 3 bn (-)87 [Meaning (-) 14
Monetary Movements in RBI's [Meaning RBI bought this
Foreign Exchange Reserves** RBI sold $$ much $$ from
(�रज़वर् ब�क फॉरे� बाजार से डॉलर क� खरीदी या from its market]
�बक्र� करेगी तािक �व�नमय दर म� ��रता रहे) reserves]
NET Balance of Payment for India 0 (ZERO) 0 (ZERO) 0 (ZERO)

32.7 🐯🐯🐯🐯 RBI’S FOREX RESERVE: �वदेशी मुद्रा �रजवर्

The Forex Reserve component(s) are =
1) Foreign Currency Assets (includes foreign currencies & G-Sec/bonds of foreign Govts)
2) Gold (�णर्)
3) Reserve Tranche Position (RTP) in the IMF. (What is RTP = NOT IMP)
4) Special Drawing Right (SDR) of International Monetary Fund (IMF)

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 109
Largest forex: 1) China ($3 Trillion) 2) Japan 3) Swiz >> 6) India (As of 2022-Nov as per �ES23)
USA is not in the top-10 list, it barely keeps ~$250 billions in reserve. Because USA has floating
exchange rate so their central bank doesn’t worry about currency exchange. (More in next section)

32.7.1 Significance of Foreign Exchange Reserves (मह�)

⇒ To maintain the exchange rate stability (मुद्रा दर म� ��रता के �लए �वदेशी मुद्रा भं डार ज़�री।)
⇒ To absorb external-shocks (बाह्य वै��क झटकों से भारतीय अथर्तंत्र को सं भालना)
⇒ To help economy in situations where foreign loans are very expensive/unavailable e.g. in
situations similar to Pakistan/SriLanka. (जब �वदेशी स्रोतों से कज़र् न �मल रहा हो।)
RULE/SUGGESTION MINIMUM AMOUNT OF FOREX RESERVE
(�ूनतम िकतना �वदेशी मुद्रा भं डार �रज़वर् ब�क ने रखना चािहए?)
IMF’s Guidotti–Greenspan Shd be Large enough to cover short-term external debt (लघु अव�ध
rule के �वदेशी ऋण चुका सके उतना फ़ोरे� भं डार होना चािहए)
RBI’s S.S.Tarapore committee Shd be Large enough to pay for 6 months’ imports (छः महीने के
आयात का ख़चार् उठा सके उतना फ़ोरे� भं डार होना चािहए)

32.7.1.1 😰😰Negative implications of Large Forex Reverse (नकारा�क आयाम)

⇒ if large forex reserve is built through exchange rate manipulation / deliberate weakening of local
currency e.g. China = then weak currency → imported inflation in crude oil etc. (फोरे� भं डार को
बड़ा करने के �लए यिद क� द्रीय ब�क जानबूझकर �ानीय मुद्रा को अप्राकृ �तक/कृ �त्रम �प से कमज़ोर रखती है → आयात महँ गी हो जाते
ह�।)
⇒ The excess money thus locked into forex reserve → not available for other activities e.g. health,
education, poverty removal, infrastructure. (और ऊपर से, वो सारा पैसा फ़ोरे� भं डार म� फँ स जाता है → वह पैसा
�श�ा, �ा�, ग़रीबी �नवारण बु�नयादी अवसं रचना आिद के �लए उपल� नहीं रहता।)

32.7.1.2 😰😰Weak Currency = Non-Tradable sector neglected

If a country excessively focuses on exports → central bank will try to keep local currency weak and
the government will focus more on giving tax cuts, subsidies and cheap loans to ‘tradable’ sectors
such as
NON-TRADABLE SECTOR TRADABLE (EASILY EXPORTABLE)
(गैर-�ापार / �नयार्त अयो� �ेत्र)
Healthcare, Education, Construction Manufacturing, IT, Food Processing

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 110
But consequently, the non-tradable sectors (health, education) receive less funding/attention →
possible loss of social /human development. (�नयार्त को बढ़ाने के �लए यिद सरकार अंधाधुंध िक़� से के वल �नयार्त यो�
�ेत्रों पर ही टै� क� कटौती/ स��डी देगी → तो अंत म� ग़ैर-�नयार्त यो� �ेत्र जैसे �श�ा, �ा�, मकान-�नमार्ण आिद पर सरकार कम
पैसा ख़चर् करती है → �जससे मानव �वकास को हा�न होती है।)

33 💱💱 PILLAR3B: CURRENCY EXCHANGE RATE: मुद्रा �व�नमय दर

33.1 FALL OF INDIAN ₹ & REMEDIES

33.1.1 Challenges to India’s BOP by ES22 and ES23

⇒ 📙📙📙📙ES22 has identified following challenges: 1) Fed Tapering: risks of global liquidity
tightening 2) Inflation in global commodity prices 3) high freight costs 4) Geo-political crisis in
Ukraine 5)
⇒ Challenges to India’s BoP as per 📙📙ES23
⇒ USA Fed Tapering impact on India→ 1) tightening of dollar supply 2) share market volatility 3)
outflow of FPI money (अमे�रक� फे ड टेप�रंग के चलते भारत म� डॉलर आपू�त म� तं गी/कटौती, एफपीआई का �नकल भागना,
शेयर बाजार म� �गरावट)
⇒ Local Currency depreciation (�ानीय मुद्रा का कमजोर होना)
⇒ Slowdown in global growth and trade ( वै��क वृ�द्ध और �ापार म� मं दी)
⇒ Inflation in global commodity prices and food prices ( व�ु और खाद्य चीजों के वै��क दामों म� महंगाई)
⇒ Russia-Ukraine conflict and other geopolitical crisis. (भू-राजनी�तक सं कट)
⇒ COVID-19 new variants.

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 111
33.1.2 🐯🐯🦁🦁RBI-Govt’s measures to prevent fall of Rupee (2022-Jul-Aug)
⇒ �RBI Exempts Foreigners’ deposits in Indian bank from CRR and SLR. This will encourage
bankers to offer attractive deposit interest rates to such clients → �dollar flow → stable rupee
/ prevent weakening of rupee (in the aftermath of US Fed Tapering). How? Ref this Video for
more: https://youtu.be/KoiXkAreWoA (�वदेशीयो के द्बचत खातों पे भारतीय ब�को ने सीआरआर व एसएलआर निह
�नभाना होगा। तािक उन खातों पर भारतीय ब�कर �वदेशी ��� को �ादा �ाज-दर दे सके और �वदेशी लोग आक�षत होकर ढेर
सारा �वदेशी धन भारत म� लेकर आए।)
⇒ � (2) RBI increased with the limit of external commercial borrowings (ECB) from present 750
million dollars to to $1.5 billion per financial year.
⇒ � (3) RBI relax to the guidelines related to FPI investment in G-Sec and Bonds.
⇒ �Govt: Foreign Contribution (Regulation) Act, 2010’s donation limits amended allowing
Indians to receive upto 10 lakh a year from their relatives abroad without informing the
authorities. (The previous limit was 1 lakh) (�बना सरकार को सू�चत िकए सालाना 10 लाख �पये तक क� रक़म
�वदेश म� रहते अपने �र�ेदारों से आप मँ गवा सकते ह�)
⇒ �Govt: Customs duty on gold hiked to 12.5 per cent from 7.5 per cent to discourage imports.

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 112
 (�वदेशों से आयात होने वाले सोने पर लगने वाली सीमा शु� म� बढ़ोतरी क� गई है।)
33.1.3 💱💱💱💱 🐯🐯 ₹ Convertibility → RBI reforms (2004-2019)
While RBI has not permitted full convertibility of Indian rupee (on Capital Account), but over the
years it has liberalised the norms, such as (पूणर् �प से छू ट तो नहीं दी, लेिकन उदारीकरण सरलीकरण िकया है)
⇒ 2016 onwards: RBI began relaxing the norms for External Commercial Borrowing (ECB),
Before-2016 2016 onwards 2022 onwards
ECB limit → more strict relaxed to $750 million per $1.50 billion per
company per year. company per year.
(✋Although ECB is prohibited in certain categories e.g. purchase of farm house, tobacco, betting,
gambling, lottery etc. कु छ �ेत्रो म� �वदेशी कजर् लेने क� मनाई)

33.1.4 💱💱💱💱 🐯🐯 FEMA Rules for Indian resident’s overseas investment (2022-Aug)
⇒ No Indian resident can invest in foreign companies who are doing gambling biz or real estate biz.
⇒ Wilful defaulters need to get a No Objection Certificate (NOC) from Indian authorities (RBI, ED
etc) before making any ‘financial commitment’ abroad (e.g. taking new loan from USA)
⇒ plus many other technical things but not very IMP for Exam.

33.2 ⚖ FCRA ACT

Sr No. MATTER RULES/LAWS APPLICABLE→
1 is Indian sending money abroad for current Yes→FEMA Act→ LRS
account or capital account transactions? (liberalized remittance scheme)
2 is foreign money coming to India for Indian Yes→ FEMA Act
export earning payment, FDI/FPI etc financial
investment, ECB loans etc ?
3 is foreign money coming to India for matters Yes→ FCRA Act
other than cell#2. e.g. inward-donation, inward-
remittance to India etc.

33.2.1 FCRA on donations

1) Foreign Contribution Regulation Act 2010 (FCRA -�वदेशी अंशदान �व�नयमन अ�ध�नयम).
2) if NGO (Non-Governmental Organization) / Universities were allowed to accept foreign
donations in an unrestricted manner, they may become puppets of ISI / Pakistan / China / CIA.
3) So, Ministry of Home Affairs (MHA) requires them to ‘register’ and furnish annual reports.
4) Organizations who fail to comply with it, are prohibited from accepting foreign donations.
(भारत म� काम कर रहे समाजसेवी सं �ान/ यू�नव�सटी इ�ािद अगर �वदेशों से चं दा लेते ह� तो उ�ोंने गृह मं त्रालय से पं जीकरण करवाना
होता है और सालाना �रपोटर् जमा करने होते ह�.)

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 113
33.2.2 FCRA on remittance
BEFORE After 2022-reform
How much money can Indian receive from his relatives ₹1 lakh ₹10 lakhs
abroad without informing the authorities.
🤩🤩Benefit? Ease of receiving foreign money without legal-paper-work → more $ to India→
prevents more fall of rupee. (�बना सरकार को सू�चत िकए सालाना 10 लाख �पये तक क� रक़म �वदेश म� रहते अपने �र�ेदारों से
आप मँ गवा सकते ह�.)

33.2.3 🤝🤝💰💰Rupee Rouble Agreement

⇒ 2018-Dec: India signed pact with Iran to pay crude oil bill in rupee currency. National Iranian
Oil Co (NIOC) will open a bank account in India’s UCO Bank (a PSB). Indian oil companies will
make payments there in ₹ currency. Then Iran used this ₹ income to pay for Indian Tea & Rice
purchase → helps � the demand of dollars. (�
�However later, due to American pressure,
govt of India stopped this arrangement).
⇒ 2022: Russian banks banned from the SWIFT messaging system that enables international
financial transactions. (Ref: Pillar1B2)
⇒ So, Russia proposed “Rupee-rouble trade agreement”. (‘Rouble’ sometimes also spelled as
‘Ruble’. 1 Ruble = 100 kopeks. Just like ₹1= 100 paisa)
⇒ In such agreement, India pays for Russian imports in rupee currency and then Russian
companies will use that money to import goods from India.

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 114
 (भारत �स से क�ा तेल आयात करेगा तब भुगतान �पया मुद्रा म� कर� → उन �पयों से �सी सरकारी क��नयां- भारत से अनाज-
दवाइयां इ�ािद ख़रीदे. �स पर ��फ़्ट �व�ीय सं देश प्रणाली क� पाबं िदयों के चलते वो एसा समझौता करने को बेताब है। एक ज़माने म�
भारत ने ईरान के साथ भी कु छ ऐसा ही समझौता िकया था।)

33.2.4 💸💸 Nostro Vostro Accounts- settlements with Russia and SriLanka

⇒ Picture is worth 1000 words. What it means? Explained in video.

⇒ India has begun utilising such accounts for doing import from Russia, SriLanka, Malaysia etc.

33.2.5 💸💸Internationalisation of Indian rupee (भारतीय �पये का अंतररा��ीयकरण )

CURRENCY SHARE IN GLOBAL FOREX RESERVES AS PER �ES23
US dollar (USD) 88%
Indian rupee (INR) 1.6%
Minimum % required to be called 4% (as per �ES23) (अलग-अलग देशों के क� द्रीय ब�क के फॉरे� आपू�त
‘international currency’ भं डारों म�, जब �ूनतम/कम से कम 4% ज�ा भारतीय �पए का होगा- तब भारतीय
मुद्रा का अंतररा��ीय करण हो चुका है ऐसा माना जाएगा।)
Internationalization means increasing the use of Rupee for current & capital transactions, and in
forex reserve of other nations. (चालू खाते पूंजी खाते, व् अ� देशों के फोरे� भं डारों म� �पए का चलन बढ़ाना)
� Benefit (फ़ायदे) � Challenges (चुनौ�तयां)
reduces the dependence of dollars India does not have enough export products that attract
& currency exchange rate Russians. So, once Ukraine war is over, Russians will not do
volatility (डॉलर पर �नभर्रता तथा �व�नमय such deals. India need to increase Quality and variety of its
दर क� अ��रता कम करेगा) exports.
[��सयों को पसं द है ऐसी ब�त सारी चीज़� भारत बनाता नहीं इस�लए यूक्रेन युद्ध ख़�
होने के बाद हो सकता है �सी हमारे साथ ऐसा समझौता रद्द कर दे]
reduces the danger of “imported if Russian Exporter uses his rupee payment to invest in
inflation” that happened with Indian share market….but when/IF he suddenly quits by
expensive dollar → expensive panic-selling those shares, it’ll crash Indian sharemarket. [�सी
petrol. (डॉलर महँ गा होने पर भारत म� पेट�ोल �नयार्तक �जसे भारतीय �पये म� पैसा �मला है वह उ�� �पयों को भारतीय शेयर बाज़ार

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 115
 � Benefit (फ़ायदे) � Challenges (चुनौ�तयां)
महँ गा हो जाता है उस आया�तत महँ गाई के म� �नवेश करेगा। लेिकन जब एक िदन वो अचानक से उन शेयसर् को पानी के भाव बैच
ख़तरे को कम करेगा) के भाग जाएगा, तब भारतीय शेयर बाज़ार �गर सकता है]
reduces India’s vulnerability to Increases India’s vulnerability to how Russian/Sri Lankan,
global-shocks like US Fed Non-Indian exporters/investors react to such global
Tapering/ Taper Tantrum (अमे�रक� situations. (�वदेशी �नयार्तक �ज�� भारतीय �पया म� पैसा �मला है वह वै��क
फे ड टैप�रंग जैसी वै��क घटनाओं म� भारत क� घटनाओं पर कै से वतर्न करते ह� उस पर भारत क� भैद्यता बढ़ेगी)
भैद्यता को कम करेगा)
�Some more benefits?
⇒ �makes it easier for India to trade with countries that are banned by USA and western powers
/ SWIFT messaging system e.g. Russia, Iran. [अमे�रक� और प��मी महास�ाओं ने �स ईरान जैसे देशों पर जो
पाबं िदयां लगायी है उसके बावजूद भी भारत उन बिह�ृ त देशों के साथ �ापार आसानी से कर पाएगा।]
⇒ �reduces the cost of doing business because Indian businessmen does not have to pay
fees/commission to forex agent for converting rupee currency into dollars. [�वदेशी मुद्रा प�रव�तत करने
वाले एज�ट को फ़�स नहीं देनी होगी, इस�लए धं धा करने क� लागत ख़चर् कम होगी]
�Conclusion: There are risks but they are unavoidable if India wants to be an ‘Atma-Nirbhar’
economic superpower.

33.3 💱💱💱IMF SPECIAL DRAWING RIGHTS (SDR: �वशेष आहरण अ�धकार)

33.3.1 💱💱💱IMF SDR Formula weightage reforms 2022

�Latest weighting �Previous weighting
U.S. Dollar �
43.38%� 41.73%
Euro 29.31% 30.93%

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 116
 �Latest weighting �Previous weighting
�
Chinese Yuan (Renminbi *added in 2015) 12.28%� 10.92%
Japanese Yen 7.59% 8.33%
Pound Sterling 7.44% 8.09%
Total 100% 100%
Reason for reform: IMF directors felt this reform was needed based on international trade and
financial market developments from 2017 to 2021.

33.4 💱💱⚔ MISC. CONCEPTS: QUANTITATIVE EASING AND FEDERAL TAPERING

Above matter is already covered in Pillar1A2: Monetary Policy Free [Win23] Lecture. Refer
https://unacademy.com/class/win23-economy-pill1ab-rbi-monetary-policydigital-
payment/T53HOK3S

33.5 💱💱 EXCHANGE RATE → MISCELLANEOUS TERMINOLOGIES

33.5.1 💱💱 NEER and REER? (Hindi not imp because only prelim relevant)
In real life we are not just trading with USA but other countries, using foreign currencies other than
US dollars (Euro, Pound, Yen, Yuan etc).

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 117
⇒ Therefore, only tracking $1=60, $1=70 will not give a full picture. So, RBI also calculates
geometric average of rupee’s exchange rate against upto 36 types of foreign currencies. The
formula will give weightage to each of those 36 foreign currencies depending on their trade-
volume with India.

⇒ The result is called “Nominal effective exchange rate (NEER)”.

⇒ When NEER is mathematically adjusted as per the CPI-inflation price-levels in India and those
foreign countries, it’s called “Real effective exchange rate (REER)”.

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⇒ REER interpreted as the quantity of domestic goods required to purchase one unit of a given
basket of foreign goods, says NCERT.

⇒ NEER vs REER values help finding whether a currency is really weakening (depreciating) against
foreign currencies or not, thus helps to know our international competitiveness in exports.
⇒ For example: REER⏬ = foreigners will find our export prices attractive. REER⏫ = foreigners
will find our export prices less attractive. Says 📔📔📔📔ES20. How?NotIMP
⇒ 2018’s analysis reveals that though Indian rupee weakened against dollar $1=₹ 63 → ₹ 74, but
rupee has not so greatly weakened against other foreign currencies.
NEER EXCHANGE RATE PERCENTAGE CHANGE as per �ES23
USD (NEER) +7.8%
INR (NEER) -4.8%
So, �ES23 said: it is not that the INR has weakened, but it is the US dollar that has strengthened.
(ऐसा नहीं है िक भारत का �पया कमजोर �आ है ब�� डॉलर मजबूत �आ है यह कहना उ�चत होगा)

34 🌐🌐🌐🌐🌐PILLAR #3C: INTL. ORGANIZATIONS

34.1.1 🌐🌐🗡🗡🗡🗡🗡⚖World Bank President?
⇒ Since USA and European powers collectively command large shareholding in World Bank &
IMF, so their informal arrangement is- USA’s favourite will be picked as World Bank chief, while
European countries’ favourite will be picked as IMF Chief.
⇒ 2023: New President : Ajay Banga (USA) to replace David Malpass (USA).
⇒ �World Bank is known for Reports? World Development Report, Ease of doing business
Index (More in Pillar4B), Remittance & Migration Report, Global Economic Prospects report

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34.1.2 🌐🌐🌐🌐🌐🛐🛐IMF bailout loans to Pakistan (2019) and SriLanka (2022)
⇒ IMF given them loans. Associated tools/loan-types/keywords are: Rapid Financing Instrument
(RFI) , rapid financial assistance, Extended Fund Facility (EFF) etc. What do they mean? How
are they different from each other?= NOT IMP. Enough to know that these are loans by IMF.

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

WTO Origin, function, tariff-non-tarrif barriers, food subsidies etc. issues of WTO covered in full
length course. Ref: https://unacademy.com/@mrunal.org (🔖🔖discount Code: 'Mrunal.org')

35.1.1 🤝🤝 � WTO Summits after 2015

2017 @Buenos Aires, Argentina failed to deliver any notable outcome.
2020 @Nur-Sultan, Kazakhstan: cancelled by Corona
2022 @Geneva, Switzerland: given below
35.2 🐠🐠WTO SUMMIT 2022 @GENEVA→ NOTABLE OUTCOMES
⇒ 1998: WTO members had agreed not to impose customs duties on electronic transmissions
(=also known as moratorium on e-commerce of data). Recent years, an exponential rise global
trade of electronic transmissions such as movies (NETFLIX), music (SPOTIFY), video games
(PUBG) and Ebooks (KINDLE) etc. So India and Africa wanted stopping this moratorium to
increase tax collection. But WTO continued it until March 31, 2024. (िड�जटल सं चार के आयात �नयार्त पर
सीमा शु� नहीं लगेगा 2024 तक। हालाँिक भारत और द��ण अफ़्रीका को एतराज़ है िक हमारी कर-आमदनी म� नुक़सान हो रहा है)
⇒ 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. (कोरोना के िटके / दवाइयों का पेट�ट/बौ�द्धक सं पदा अ�धकार �जस कं पनी के पास है,
उस कं पनी क� अनुम�त �लए �बना भी, अ� कं प�नयां उसका उ�ादन कर पाएं गी। तािक स�े दामों पर ये दवाइयां उपल� हो।)
⇒ We’ll resolve the deadlock of Judges vacancies / appointment. We’ll setup a well-functioning
dispute settlement system by 2024. (�ायाधीशों के �र�/ख़ाली पदो को भर�गे। �ववाद �नपटान प्रणाली द�ु � कर�गे.)
⇒ 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).
(म� उद्योग से पयार्वरण/ जैव-�व�वधता को हा�न करने वाली स��डी पर कटौती पाबं दी क� बात�)

Above is around 200 words note. Elaborate, give background, add linkages with taxation, food
security, SDG goals to drag it till 250 words. Further faaltu-ki-PHD NOT required.

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35.3 🐠🐠WTO FISH SUBSIDIES (म� स��डी पर समझौता)

WTO’s Agreement on Fisheries Subsidies (AFS) signed in WTO Sumit/ Ministerial Conference 2022
at Geneva. AFS prohibits three kinds of subsidies: (�न� िक� क� मदद से स��डी पर पाबं दी)
⇒ ✋🚨🚨(1) illegal, unreported, or unregulated (IUU) fishing
⇒ ✋🚨🚨(2) fishing of already over-exploited species/stocks
⇒ ✋🚨🚨(3) fishing on unregulated high seas.
🚩🚩🚩FAQ: What do above things mean, how are they different from each others? ANS. NOTIMP.
Sufficient to know ke WTO wants to stop over-fishing.

But, India wants special and differential treatment (S&DT) bcoz. भारत को ख़ास और �भ�कर छू ट चािहए �ोिक:
�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. (सतत �वकास ल�ों म� बेरोकटोक मछली-पकड़ने के �ख़लाफ़ का पाबं दी का ल� भी है। इस
िदशा म� ड�ूटीओ ने एक प्रशं सनीय कदम उठाया है हालांिक भारत को कु छ प्रावधानो से ऐतराज है।)

🔠🔠❓MCQ. Find correct statements relating to WTO: [UPSC-CDS-2014-II]

1. The WTO deals with the global rules of trade between nations.
2. The goal of the WTO is to help producers of goods and services, exporters, and importers
conduct their business.
3. The WTO, which is a successor body of the General Agreement on Tariffs and Trade, came into
being following the Uruguay Round of Negotiations.
4. The WTO distances itself in framing of rules on trade in intellectual property rights.
Codes: (a) 1, 2 and 3 (b) 2, 3 and 4 (c) 1, 2 and 4 (d) 1 and 3 only

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35.4 🤝🤝 CONVENTIONAL GRAVITY MODEL (पारंप�रक गु��ाकषर्ण मॉडल)

⇒ Developed by Jan Tinbergen, a Dutch economist in 1960s.

⇒ It explains factors affecting trade between two countries: (दो देशों के बीच �ापार को प्रभा�वत करने वाले
कारक)
FACTOR PROPORTION EXAMPLE
Economic size/GDP Directly proportional A country with a larger GDP will attract more
(सकल घरेलू उ�ाद) (सीधा अनुपात) trade and investment from a smaller GDP
country. e.g. SriLanka-India vs Bhutan-India
Geographical Inversely more distance = less trade, due to transportation
distance (भौगो�लक proportional (�वपरीत cost e.g. India-Mexico vs India-S.Africa
दू री/अंतर) अनुपात)
Over the time more economists have added following factors
⇒ Exchange rates (�व�नमय दर)
⇒ Income levels of customers (ग्राहकों क� आय का �र)
⇒ Tariff and non-tariff barriers (शु� और ग़ैर-शु� बाधाएँ )
⇒ Infrastructure, skilled manpower (बु�नयादी अवसं रचना, कु शल मानव सं साधन)

Therefore signing free trade agreements may not immediately show +ve impact on India from day1.
It takes time for above factors to mature/show effect. Said �ES23 (इस�लए मु� �ापार समझौता करने के
पहले िदन से ही भारत पर सकारा�क असर नहीं िदखेगा �ोंिक उ� कारकों को प�रप� होने म� और अपना असर िदखाने म� समय लगता
है)

35.5 FREE TRADE AGREEMENTS IN RECENT TIMES

35.5.1 🤝🤝FTA: India UAE CEPA, and India Australia ECTA

This is already covered in [Win22] series last year. Refer https://Mrunal.org/win23

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 122
35.5.2 💍💍Interim (early harvest) trade agreement (शादी से पहेले सगाई)
⇒ Signed between two countries on a small list of goods and services. (एक “अंत�रम �ापार समझौता” �जसम�
व�ुओ ं और सेवाओं क� एक छोटी सूची पर टै� कम क�ए जाए)
⇒ They act as a frontrunner before signing a more comprehensive free trade agreement (FTA).
⇒ 2022: India and UK exploring to sign an “early harvest trade agreement” covering some 40-65%
goods and services. In the final free trade agreement (FTA) agreement, we aim to cover 90%
goods/services’ import export. (बाद म� बड़ा मु� �ापार समझौता कर�गे.)
⇒ Similarly, India-Canada Early Progress Trade Agreement (EPTA).

35.6 🌐🌐🌐🌐🌐🌐INDO-PACIFIC ECONOMIC FRAMEWORK (IPEF)

⇒ Intro-Origin: 2022- USA launched it on the sidelines of QUAD Summit in Tokyo, Japan.
⇒ President Biden launched IPEF bcoz 1) Trump pulled out of TPP11. Now President Biden need
to make friends again in Pacific 2) To counter RCEP, China’s Belt-Road-Initiative. (3)
�influence over Asia. (ए�शया पै�सिफक म� अपना प्रभु� वापस पुनः �ा�पत करने के �लए अमे�रका क� मुिहम है ये)
⇒ IPEF is not a traditional trade agreement. Has four pillars: (पर�रागत �ापार समझौता नहीं।)

⇒ �1) supply-chain resilience. (पहला �� है आपू�त श्रृंखला को लचीला/ सु�ढ़ बनाना)

⇒ �2) clean energy, decarbonisation, and infrastructure. (�� ऊजार्, डीकाब�नाइजेशन और बु�नयादी)
⇒ �3) taxation and anti-corruption. (कराधान और भ्र�ाचार)
⇒ �4) fair and resilient trade. India has not joined this pillar. (�न�� और लचीला/ सु�ढ़ �ापार, हालाँिक
भारत ने इस �� पे ह�ा�र निह िकए)

India signed IPEF (Except Trade pillar), but problems: (भारत को ही चुनौती आ सकती है)
⇒ 😥😥1) Child Labour, environment standards, India’s hesitancy over Genetically Modified
crops. (बाल मज़दू री, पयार्वरण सुर�ा, GM-फ़सलो म� अमरीका अपनी सोच भारत पर थोप सकता है)
⇒ 😥😥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. (�ांमार जैसे तानाशाह देशों के साथ भारत के �र�ों पर अमरीका अपनी सोच थोप सकता है)
⇒ 😥😥3) Anti-corruption / transparency / religious freedoms : USA government reports tend to
project India in a poor light. (अमरीक� सरकारी �रपोटर् म� भ्र�ाचार, धा�मक �तं त्रता के बारे म� भारत को नकारा�क �प से
तोला जाता है। तो अब इस नए ढांचे के नाम पर अमरीका हमको और खरी खोटी सुना सकता है।)
⇒ 😥😥4) India has not joined the trade pillar. (Perhaps fearing that American solar panel, poultry
etc industry may harm local Indian industry. REF: WTO Disputes)

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. (हाँ िह�-प्रशांत �व�ार म�
भारत के आ�थक िहतों को बढ़ाने म� मदद तो कर सकता है, िक�ु उ� चुनौ�तयों को ज� के समय ही दबा देना ज़�री।)

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35.6.1 Why FTA increasing as per 📙📙ES23
⇒ Free trade agreements between nations are increasing because
⇒ Recent WTO summits have failed to give positive outcomes, due to bickering among nations
over Doha Development Agenda, Food Subsidy etc. (वतर्मान समय म� ड�ूटीओ प�रषद ब�त सकारा�क
प�रणाम नहीं दे सक�, �ोंिक सद�ों म� आपसी मनमुटाव और पुराने मामलों पर झगड़े चलते रहते ह�)
⇒ Free Trade Agreements are much easier to finalise than WTO agreements because friendly
nations show more flexibility towards each other. (e.g. Compared to USA vs China on Doha
Agenda) (ड�ूटीओ के मुकाबले मु� �ापार समझौते आसानी से �नपट जाते ह� �ोंिक �मत्र रा�� एक दू सरे के प्र�त �ादा लचीला
रवैया िदखाते ह�)
FTA give following benefits to member nation:
⇒ Easier access to raw materials after tax-cuts. (क�ा माल स�े दामों पर �मले.)
⇒ Lower prices for consumers (ग्राहकों के �लए भी स�ी क�मत�)
⇒ increasing customers/market size for export products (ग्राहकों म� बढ़ोतरी)
⇒ Protecting against unfavourable trade policies of other countries, by finding new friends. e.g.
China vs India-Aussie. (अ� देशों क� नकारा�क नी�तयों के �खलाफ �लए नए दो� खोज �लए जाएं )
⇒ promoting peace and stability (शां�त और ��रता.)

35.7 INTERNATIONAL GROUPING

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 124
Above organizations’ foundation year, memberlist, HQ, etc covered in full length course.

35.7.1 G20 2023 Summit theme and logo

- International forum for the governments and central bank governors - Argentina, Australia,
Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea,
Mexico, Russia, Saudi Arabia, South Africa, Turkey, UK, USA, EU
- G20 Common Framework: G20 + Paris Club together devised a framework to help the low-
income countries in its loan repayment problems (2020)
- Annual summits: 2018@Buenos Aires-Argentina, 2019@Osaka-Japan, 2020-Nov@Saudi
Arabia’s Riyadh, 2021@Italy’s Rome, 2022@Indoensia, 2023@India.

⇒ G20 summit 2023 to be held at India.

⇒ Theme:- “Vasudhaiva Kutumbakam” or “One Earth One Family One Future” - is drawn from
the ancient Sanskrit text of the Maha Upanishad
⇒ Logo:- globe/earth resting on a lotus

35.7.2 🌐🌐🌐🌐🌐🌐Minerals Security Partnership (MSP: अ�त मह�पूणर् ख�नजों के �लए भागीदारी/सहयोग)
⇒ 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 yet. (हालाँिक भारत को सद� बनने का �ोता अभी तक नहीं �मला)
�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. (�� ऊजार् तथा चालू खाता घाटे के सं दभर् म� हम� अ�त मह�पूणर् ख�नजो के �लए भागीदारी/सहयोग करनी होगी.)

36 �📡📡MRUNAL’S ECONOMY COURSE FOR UPSC

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 125
 Link to join my full length economy course covering both theory & current for UPSC
https://unacademy.com/@mrunal.org (Discount Code: Mrunal.org)

37 �📡📡MRUNAL’S MONTHLY CURRENT MAGAZINE

https://unacademy.com/content/upsc/downloads/ (Unlock Code: Mrunal.org)

38 WHAT IS ALREADY COVERED IN PAST: 3AB

�न� चीज़� हम पहले ही पढ़ चुके ह�. आपने नहीं पढ़ा तो उसम� से देख लेना
LINKs to Previous Video Lectures at https://mrunal.org/win23

Red highlight.= I find them less important for the 2023 prelims.

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 126
38.1.1 Win20: already covered Following in 3AB👇👇
⇒ � BoP-Classification: RBI’s (Actual) method
⇒ Budget-2020: Medieval Dictionary terms for trade/commerce
⇒ �🎖🎖 Terms of Trade (आयात-�नयार्त ���त)
⇒ Net Terms of Trade (NTT) or Commodity terms of trade
⇒ Gross (Barter) Terms of Trade (GTT, �सफर् �प्र�लम के �लए, अत: िहदं ी अनाव�क)
⇒ Income terms of trade (ITT)
⇒ ES20 DATA: Top Import and Exports
⇒ � (IYB20 Ch7): Largest importer and exporter in world
⇒ � Remittance: Global migration report 2020 (अंतररा��ीय प्रवास)
⇒ � Remittance: Sidetopic → Pravasi Bharatiya Diwas (PBD)
⇒ �Balance of payment → Current Account → Import of Oil
⇒ ��BoP: Current → Fall of Crude oil prices in negative figure
⇒ ��BoP: Current → Petrol & Diesel Prices in India
⇒ 🎖🎖Balance of payment → Current Account → Import of Gold
⇒ 🎖🎖🎖🎖: Gold price in Corona
⇒ �BoP → Current → Export → Geographical Indication (GI)
⇒ ���BoP → Current: Exports → Foreign Trade Policy (2015-2020)
⇒ ��Tax Credit for Exporters: MEIS/SEIS
⇒ Tax Credit for Exporters: RoDTEP?
⇒ �Port Logistics: Authorised Economic Operator (AEO)
⇒ ES20: “Assemble in India”
⇒ �🎖🎖: 🗃🗃�
� BoP → Capital Account→ Investment→ FDI / FPI
⇒ 🖱🖱�
� India’s new rules for E-Commerce (2020-Jul)
⇒ 🗃🗃🗃🗃🗃🗃 BoP: Capital → Chinese FDI need Govt approval
⇒ � Related Topic: Cabinet Committees
⇒ * ��� International Financial Services Centre (IFSC)
⇒ ���: � IFSC Authority Act, 2019
⇒ � � BoP → Capital Account → Misc. Concept: NIIP
⇒ � � BoP → Capital Account → Composition of India’s external debt
⇒ �� RBI’s Forex Reserve: �वदेशी मुद्रा �रजवर्
�🎖🎖>🗃🗃�
⇒ (� �)�
� Disequilibrium in BoP: Factors responsible
⇒ � Currency Exchange Rate: मुद्रा �व�नमय दर
⇒ ��Currency Exchange Rate → Attracting Dollars: VRR and FAR
⇒ �� � Currency Exchange Rate in Corona-Crisis
⇒ � Exchange Rate → Misc. → Purchasing Power Parity (PPP)
⇒ ��
��Pillar3B: International Org

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 127
⇒ ��
��Bretton Woods → IMF, Washington, 1945, Dec
⇒ ��
���IMF gives loan to Pakistan (2019)
⇒ ��
�� (Non-Bretton Woods) → Multilateral Development Banks
⇒ �� � Theories of International Trade
⇒ Mercantilist Theory: �ापारी �सद्धांत
⇒ Adam Smith’s Theory of Absolute Cost Advantage (1776)
⇒ David Ricardo’s Theory of Comparative/Relative Cost Advantage (1817)
⇒ Heckscher and Ohlin’s Factor - Proporations Theory (1919)
⇒ ��
�� World Trade Organization: �व� �ापार सं गठन
⇒ � � Kazakhstan Summit cancelled (2020-June)
⇒ ��
��: Tariff Barriers against international trade: Dumping
⇒ ��
��� WTO Disputes : India’s export incentive schemes
⇒ �⛷�
�Free Trade agreements → TPP11, RCEP
⇒ �⛷�
� TPP-11 or CPTPP
⇒ �⛷�
� Trade agreements → USMCA & AFCFTA
⇒ �⛷� � Regional Comprehensive Economic Partnership (RCEP)
⇒ Budget-2020: FTA ‘rules of origin’ (उ��� के �नयम)
⇒ �⛷�
�India’s trade agreements
⇒ ��
�� Burning issues in International trade
⇒ ��
��Protectionism, Trade war: सं र�णवाद, �ापार युद्ध
⇒ ���
��: ��Protectionism → Medicine and Defence
��: �� Protectionism → Indian Govt procurement (सरकारी खरीद)
⇒ * ���
⇒ ��
���USA’s Generalised System of Preferences (GSP) list
⇒ ��USA Reciprocal Trade Bill/Act (पार��रक �ापार �वधेयक / अ�ध�नयम)
⇒ ��� India-USA limited trade deal (सी�मत �ापार सौदा)
⇒ ��
���Groupings: Indian subcontinent → SAARC
⇒ ��
��Groupings led by Gora → G20 (Group of 20)
⇒ ��⛷ G20: Osaka Declaration
⇒ ��⛷�
��Osaka declaration: why India refused to sign
⇒ ��
��Groupings led by Gora → G7 and D10
⇒ ��
�G7 - Group of Seven (1975)
⇒ ��
�� D10: 5G club proposed by UK (2020)
⇒ ��BREXIT = BRITAIN EXIT
⇒ ��
��Groupings / Issues: Middle East
⇒ � ⛴�
� Vande Bharat Mission 2020- Indians ki watan-waapsi
⇒ ���:�
��Kuwait Expat Bill (�वदेशी मजदू रों क� सं �ा � का �वधेयक)
⇒ ��
�� Export control / Non-Proliferation regimes

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 128
⇒ ���USA Exit from Arms Treaties (श� सं �ध)

38.1.2 Win21: already covered Following in 3AB👇👇

⇒ Top Import and Exports During Corona April-Nov-2020 as per ES21
⇒ ��� Crude Oil prices & OPEC (क�ा तेल)
⇒ �Report: World Bank report: Migration and Development Brief 2021
⇒ �Report: Remittance: Global migration report 2020 (अंतररा�ी� य प्रवास)
⇒ �Report: Export Preparedness Index by NITI (2020,Aug: �नयार्त तैयारी सूचकांक)
⇒ �Report: UNCTAD's World Investment Report 2020 (�व� �नवेश �रपोटर्)
⇒ ��� BoP → Capital Account (चालू खाता → पूंजी खाता)
⇒ ��:FDI inflow in Corona (�वदेशी प्र�� �नवेश)
⇒ ��Foreign Investment limits � in recent times
⇒ �� Golden Visa (�नवेशकों और प्र�तभावान लोगों को आक�षत करने के �लए �णर् वीज़ा)
⇒ � Currency Exchange Rate: मुद्रा �व�नमय दर
⇒ ���: � � Mundell-Fleming Trilemma (मं डल �े�मगं क� �त्र-आयामी दू �वधा)
⇒ �� RBI’s Forex Reserve: �वदेशी मुद्रा �रजवर्
⇒ ��
�International Orgs, Agreements & Summits
⇒ ��
�� World Trade Organization: �व� �ापार सं गठन
⇒ ��
�� WTO’s New Director General
⇒ ��
�� WTO’s Next Summit
⇒ ��
���� WTO’s Appellate Body (AB) Crisis
⇒ ��
���� WTO Multiparty Interim Arbitration (MPIA) mechanism
��: �� Protectionism → Indian Govt procurement (सरकारी खरीद)
⇒ * ���
⇒ ��
�� Groupings: ASEAN & SCO New Summits
⇒ ��
�Groupings: BRICS, G20: New Summits
⇒ ��
� G7 Summits 2021: Global Minimum Tax
⇒ ��
� BIMSTEC charter (घोषणापत्र)
⇒ �� � India UK Roadmap 2030
⇒ India Mauritius FTA/CECPA (मॉ�रशस के साथ मु� �ापार समझौता)
⇒ ���Abraham Accords (2020-Sept)

38.1.3 Win22: already covered Following in 3AB👇👇

⇒ �🎖🎖 Balance of payment → Current Account →
⇒ �🎖🎖 Top Import and Exports of GOODS for India:
⇒ �🎖🎖 Goods Export Before & AFTER Corona: Notable items
⇒ India’s TOP Agriculture Exports
⇒ �🎖🎖 Goods Import Before & AFTER Corona

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 129
⇒ �🎖🎖 SERVICES Export Before & AFTER Corona (i.e. 2018, 2019)
⇒ �🎖🎖 SERVICES Import Before & AFTER Corona (i.e. 2020, 2021)
⇒ ��India’s trade partners: Import / Export
⇒ India’s trade partners: Trade Surplus / Deficit With Notable Countries
⇒ �� Reports / Indices related to Export & Remittance
⇒ ��Export Preparedness Index by NITI ( �नयार्त तैयारी सूचकांक)
⇒ ��Global Survey on Digital and Sustainable Trade Facilitation by UNESCAP
⇒ ��Report: Goods Trade Barometer Index
⇒ �Balance of payment → Current Account → Import of Oil
⇒ ��� Crude Oil: Russia-Ukraine War (2022)
⇒ ��Budget-2022 Announcements to �CAD
⇒ �🎖🎖: 🗃🗃�
� BoP → Capital Account→ Investment→ FDI / FPI
⇒ 🗃🗃🗃🗃🗃🗃🗃🗃 Foreign Portfolio Investment (FPI: पोटर्फ़ो�लयो �वदेशी �नवेश)
⇒ 🗃🗃🗃🗃🗃🗃🗃🗃 Foreign Direct Investment (FDI: प्र�� �वदेशी �नवेश)
⇒ 🗃🗃🗃🗃🗃🗃🗃🗃 FDI in India → Source Nation-wise Top-5
⇒ 🗃🗃🗃🗃🗃🗃🗃🗃 FDI in → Sector wise Top-5
⇒ �🎖🎖: 🗃🗃�
� BoP → summing up
⇒ �� RBI’s Forex Reserve: �वदेशी मुद्रा �रजवर्
⇒ �� Dollar- the Global Currency & ”DE-Dollarization”? (वै��क-आर��त-मुद्रा)
⇒ Dollar Swap
⇒ Rupee Rouble Agreement
⇒ �� Misc. Concepts: Quantitative Easing and Federal Tapering
⇒ ��
�� WORLD TRADE ORGANIZATION: �व� �ापार सं गठन
⇒ �TRADE AGREEMENTS TYPES: �ापार समझौते के प्रकार
⇒ �FTA: India UAE CEPA, 2022
⇒ �FTA: India Australia ECTA (आ�थक सहकार और �ापार समझौता)
⇒ ��
�� BRICS NDB Bank gets NEW MEMBERS

NEXT Handout: Pillar4ABC: Sectors of Economy- Agri, Mfg, Services

Mrunal’s Economy Win23 Series Pillar#3 -BoP Intl Trade → Page 130