International Trade (Part – II)

Total Questions: 50

21. Which of the following has/have occurred in India after its liberalization of economic policies in 1991? [I.A.S. (Pre) 2017]

1. Share of agriculture in GDP increased enormously.

2. Share of India's exports in world trade increased.

3. FDI inflows increased.

4. India's foreign exchange reserves increased enormously.

Select the correct answer using the codes given below:

Correct Answer: (b) 3 and 4 only
Solution:Agriculture and allied sectors accounted for nearly 30 percent of the total GDP in 1991 while in 2023-24 (2nd A.E.), it accounted for 17.6 percent of the total GVA of Indian economy on current basic prices. Thus, Statement 1 is incorrect. As per the WTO data, share of India's exports in world's merchandise trade is 1.8 percent in 2022 which was only at 0.5 percent and 0.7 percent in 1990 and 2000 respectively.

Total FDI flows into India was increased from US $ 4029 million in 2000-01 to US $ 45148 million in 2014-15 and US $ 44423 million in 2023-24 (April-March). India had Forex reserves of only about US $ 1.1 billion in 1991 which enormously increased to US $ 300 billion in April, 2014 and US $ 651.5 billion on 31 May, 2024. Hence, statements 2,3 and 4 are correct.

22. Which of the following changes have taken place in Indian Economy after Economic Reforms in 1991? [Uttarakhand P.C.S. (Pre) 2021]

Correct Answer: (d) Both (b) and (c)
Solution:Agriculture and allied sectors accounted for nearly 30 percent of the total GDP in 1991 while in 2023-24 (2nd A.E.), it accounted for 17.6 percent of the total GVA of Indian economy on current basic prices. Thus, Statement 1 is incorrect.

As per the WTO data, share of India's exports in world's merchandise trade is 1.8 percent in 2022 which was only at 0.5 percent and 0.7 percent in 1990 and 2000 respectively.

Total FDI flows into India was increased from US $ 4029 million in 2000-01 to US $ 45148 million in 2014-15 and US $ 44423 million in 2023-24 (April-March). India had Forex reserves of only about US $ 1.1 billion in 1991 which enormously increased to US $ 300 billion in April, 2014 and US $ 651.5 billion on 31 May, 2024.

23. Which of the following is not true about globalization and its impact on India? [B.P.S.C. (Pre) 2023]

Correct Answer: (c) Increase in exports is greater than increase in imports.
Solution:Globalization has significantly impacted the Indian Economy in various ways. New opportunities for trade and investment have emerged. It has expanded trade in goods and services. It has led to greater inflow of FDI in India. It also has a favourable impact on the overall growth rate of the economy.

Due to globalization, Indian exports and imports both are increased. However, it can not be said that increase in exports is greater than increase in imports. Increasing trends of merchandise trade deficit explicitly reflect this. Hence, statement of option (c) is not true about globalization and its impact on India.

24. When was the process of economic reforms started in India? [Jharkhand P.C.S. (Pre) 2023]

Correct Answer: (a) 1990
Solution:The process of economic reforms started in India in 1991, when India was experiencing a severe economic crisis. The crisis in 1991 served as a catalyst for the government to initiate a comprehensive economic reform agenda, including liberalization, privatization and globalization.

Liberalisation

The objective of liberalisation was to put an end to those rigidities and restrictions that were acting as a hindrance to the growth of the country. Further, in this approach, the Government was expected to be flexible with its regulation in the nation.

The objectives of this policy were to enhance the competition among the domestic industries and encourage international trade with planned imports and exports. Moreover, it aimed at increasing internationaltechnology and capital. Also, this policy was expected to expand the international market frontier of the nation and reduce the burden of debt in the country.

Privatisation

The second policy of the stabilisation measure is privatisation. This policy aims to expand the domination of private sector companies and reduce the control of the public sectors. Thus, the Government-owned enterprise will have less ownership. Besides these Government companies can be converted into private sector companies with two approaches.

These approaches are by withdrawing the control of the Government in the public sector company and by disinvesting. There are three forms of Privatisation which are a strategic sale, partial sale, and token privatisation. In the strategic sale or denationalisation, the Government needs to deliver 100% of productive resources ownership to the owners of the private companies.

Globalisation

In this policy, the country's economy is expected to grow with the help of the global economy. This means that the primary focus would be on foreign trade and institutional and private investments. It is the third and the last policy that is to be implemented.

The objective of this phenomenon is to develop and independent the world with the implication of suitable strategies. It is the attempt to create a world where the requirements of one country can be driven and turned into one large economy.

25. Free Trade Policy refers to a policy where there is : [U.P.P.C.S. (Mains) 2005]

Correct Answer: (a) Absence of tariff
Solution:A free trade policy is a pact between two or more nations to reduce barriers to imports and exports among them. Under a free trade policy, goods and services can be bought and sold across international border with little or no government tariffs, quotas, subsidies or prohibition to inhibit their exchange.

Types of Trade Agreements:

  • Partial Scope Agreements (PSA): Focus on a limited number of goods.
  • Free Trade Agreements (FTA): Reduce tariffs between member countries while retaining individual tariff policies with non-members.
  • Customs Union: Includes a common external tariff for non-members.
  • Common Market: Facilitates free movement of goods, services, and factors of production.
  • Economic Union: Coordinates macroeconomic and exchange rate policies among member nations.
  • Major Trade Agreements of India: India-ASEAN FTA, India-South Korea CEPA, and proposed agreements like India-UK and India-EU.

26. Free Trade Zones have been established in India for the: [U.P.P.C.S. (Mains) 2002, 2003, U.P.P.C.S. (Spl.) (Mains) 2004]

Correct Answer: (c) promotion of export industries
Solution:Free Trade Zones (SEZs/FTWZs) have been established in India for the promotion of export industries. A free trade zone is an area where goods may be landed, stored, handled, manufactured or reconfigured and re-exported under specific customs regulation and generally not subject to customs duty.

About Special Economic Zones

  • SEZs are special areas within a country that offer incentives to business and trade regulations operating in those areas.
  • SEZs typically offer competitive infrastructure, duty-free exports, tax incentives, and other measures designed to make it easier to conduct business.
  • The main objectives of the SEZ are generating additional economic activity, promoting exports of goods and services from the country, promoting foreign and domestic investment, and creating more employment opportunities besides the development of infrastructure facilities.
  • The category 'SEZ' covers a broad range of zone types, few of which are free zones (FZs), industrial estates (IEs), free ports, free trade zones (FTZs), and export processing zones (EPZs).

27. Free trade zone is one where: [U.P.P.C.S. (Mains) 2007]

Correct Answer: (d) industries are free from excise duties and produce for exports
Solution:Free Trade Zones (SEZs/FTWZs) have been established in India for the promotion of export industries. A free trade zone is an area where goods may be landed, stored, handled, manufactured or reconfigured and re-exported under specific customs regulation and generally not subject to customs duty.

About Special Economic Zones

  • SEZs are special areas within a country that offer incentives to business and trade regulations operating in those areas.
  • SEZs typically offer competitive infrastructure, duty-free exports, tax incentives, and other measures designed to make it easier to conduct business.
  • The main objectives of the SEZ are generating additional economic activity, promoting exports of goods and services from the country, promoting foreign and domestic investment, and creating more employment opportunities besides the development of infrastructure facilities.
  • The category 'SEZ' covers a broad range of zone types, few of which are free zones (FZs), industrial estates (IEs), free ports, free trade zones (FTZs), and export processing zones (EPZs).

28. In India, Special Economic Zone policy was announced in: [U.P.P.C.S. (Mains) 2017, U.P.P.C.S. (Mains) 2014, U.P.R.O./A.R.O. (Mains) 2017]

Correct Answer: (a) April, 2000
Solution:The Special Economic Zone (SEZ) policy in India first came into inception on 1 April, 2000. Its prime objective was to enhance foreign investment and provide an internationally competitive and hassle free environment for exports. The idea was to promote exports from the country and realizing the need that level playing field must be available to the domestic enterprises and manufacturers to be competitive globally.
  • Asia's first EPZ (export processing zones) set up in Kandla, Gujarat, in 1965, followed by seven more EPZs in the country.
  • The SEZ policy was introduced in April 2000, and it is envisioned to make SEZs a driver for economic growth supported by quality infrastructure and accompanied by an attractive incentives package, at the centre and state levels in the country.
  • The eight pre-existing EPZs located at Kandla and Surat (Gujarat), Mumbai (Maharashtra), Cochin (Kerala), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal), and Noida (Uttar Pradesh) were converted into SEZs under this scheme.
  • Later, the SEZ Act, 2005 was passed by the Indian Parliament in May 2005, and the act, supported by SEZ Rules, came into effect on February 10, 2006.
  • As of March 31, 2024, there are 280 operational SEZs in India.

29. The policy for Special Economic Zone (SEZ) was introduced in the country for the first time in: [J.P.S.C. (Pre) 2016]

Correct Answer: (b) 2000
Solution:The Special Economic Zone (SEZ) policy in India first came into inception on 1 April, 2000. Its prime objective was to enhance foreign investment and provide an internationally competitive and hassle free environment for exports. The idea was to promote exports from the country and realizing the need that level playing field must be available to the domestic enterprises and manufacturers to be competitive globally.
  • Asia's first EPZ (export processing zones) set up in Kandla, Gujarat, in 1965, followed by seven more EPZs in the country.
  • The SEZ policy was introduced in April 2000, and it is envisioned to make SEZs a driver for economic growth supported by quality infrastructure and accompanied by an attractive incentives package, at the centre and state levels in the country.
  • The eight pre-existing EPZs located at Kandla and Surat (Gujarat), Mumbai (Maharashtra), Cochin (Kerala), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal), and Noida (Uttar Pradesh) were converted into SEZs under this scheme.
  • Later, the SEZ Act, 2005 was passed by the Indian Parliament in May 2005, and the act, supported by SEZ Rules, came into effect on February 10, 2006.
  • As of March 31, 2024, there are 280 operational SEZs in India.

30. Special Economic Zone (SEZ) Act became effective in: [U.P.P.C.S. (Pre) 2007, 2009]

Correct Answer: (c) 2006
Solution:The Special Economic Zone (SEZ) policy in India first came into inception on 1 April, 2000. Its prime objective was to enhance foreign investment and provide an internationally competitive and hassle free environment for exports. The idea was to promote exports from the country and realizing the need that level playing field must be available to the domestic enterprises and manufacturers to be competitive globally.
  • Asia's first EPZ (export processing zones) set up in Kandla, Gujarat, in 1965, followed by seven more EPZs in the country.
  • The SEZ policy was introduced in April 2000, and it is envisioned to make SEZs a driver for economic growth supported by quality infrastructure and accompanied by an attractive incentives package, at the centre and state levels in the country.
  • The eight pre-existing EPZs located at Kandla and Surat (Gujarat), Mumbai (Maharashtra), Cochin (Kerala), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal), and Noida (Uttar Pradesh) were converted into SEZs under this scheme.
  • Later, the SEZ Act, 2005 was passed by the Indian Parliament in May 2005, and the act, supported by SEZ Rules, came into effect on February 10, 2006.
  • As of March 31, 2024, there are 280 operational SEZs in India.