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International Trade (Part – I)

📆 October 19, 2024

Total Questions: 50

1. Consider the following statements about 'Rules of Origin': [B.P.S.C. (Pre) 2023]

1. Rules of Origin are the criteria needed to determine the national source of a product.

2. Rules of Origin help the custom agencies to know what regulations and fees apply to a given product.

3. These are used for the purpose of trade statistics.

4. Their importance is derived from the fact that duties and restrictions in several cases depend upon the sources of imports.

Which of the above statements are correct?

 

Correct Answer: (d) All of the above
Solution:Rules of origin are the criteria needed to determine the national source of a product. Their importance is derived from the fact that duties and restrictions in several cases depend upon the source of imports. There is wide variation in the practice of governments with regard to the rules of origin. While the requirements of substantial transformation is universally recognized, some governments apply the criterion of change of tariff classification, others the ad valorem percentage criterion and yet others the criterion of manufacturing or processing operation. In a globalizing world it has become even more important that a degree of harmonization is achieved in these practices of members in implementing such a requirement. Rules of origin are used:

➤ to implement measures and instruments of commercial policy such as anti-dumping duties and safeguard measures;

➤ to determine whether imported products shall receive most-favoured-nation (MFN) treatment or preferential treatment;

➤ for the purpose of trade statistics;

➤ for the application of labelling and marking requirements; and

➤ for government procurement.

Hence, all of the given statements are correct.

2. Read the following statements about Supply Chain Resilience Initiative (SCRI): [R.A.S./R.T.S. (Pre) 2021]

1. In the context of International trade, supply chain resilience is an approach that helps a country to ensure uninterrupted supply of import in an unexpected situation.

2. This is an initiative of five countries, India is one of them.

Choose the correct code:

 

Correct Answer: (a) Only 1 is true
Solution:The Trade Ministers of India, Japan and Australia formally launched the Supply Chain Resilience Initiative in a Trilateral Ministerial Meeting held virtually on April 27, 2021. In the context of International Trade, SCRI is an approach that helps a country to ensure the uninterrupted supply of im- ports in an unexpected situation. This approach helps a country to ensure that it has diversified its supply risk across a clutch of supplying nations instead of being dependent on just one or a few.

3. Which Ministry of Government of India is related for India's Foreign Trade Policy? [M.P.P.C.S. (Pre) 2019]

Correct Answer: (c) Ministry of Commerce and Industry
Solution:Ministry of Commerce and Industry of Government of India is related to India's Foreign Trade Policy. At present, Piyush Goyal is the Union Minister of Commerce and Industry.

Foreign Trade Policy (2023) is a policy document which is based on continuity of time-tested schemes facilitating exports as well as a document which is nimble and responsive to the requirements of trade.
The Key Approach to the policy is based on these 4 pillars -

  • Incentive to Remission,
  • Export promotion through collaboration - Exporters, States, Districts, Indian Missions,
  • Ease of doing business, reduction in transaction cost and e-initiatives and
  • Emerging Areas - E-Commerce Developing Districts as Export Hubs and streamlining SCOMET policy..

4. The long-term vision of the Department of Commerce is to make India a major player in the world trade by: [U.P.P.C.S. (Mains) 2014, 2017, U.P.R.O/A.R.O. (Mains) 2014]

Correct Answer: (c) 2020
Solution:As per the India's Foreign Trade Policy (2015-20), the long- term vision of the Department of Commerce was to make India a major player in the world trade by 2020 and assume commensurate with India's growing importance. Foreign of  trade  Policy 2023 (launched on 31 March, 2023) seeks to take India's overall exports to 2 trillion dollars by 2030.

5. With reference to the international trade of India at present, which of the following statements is/are correct? [I.A.S. (Pre) 2020]

1. India's merchandise exports are less than its merchandise imports.

2. India's imports of iron and steel, chemicals, fertilizers and machinery have decreased in recent years.

3. India's exports of services are more than its imports of services.

4. India suffers from an overall trade/current account deficit.

Select the correct answer using the code given below:

 

Correct Answer: (d) 1, 3 and 4 only
Solution:According to the Economic Survey 2022-23, India's merchandise exports during 2021-22 were US $ 422.00 billion (US $291.81 billion in 2020-21 and US $ 313.36 in 2019-20) as compared to US $ 613.05 billion of imports during 2021-22 (US$ 394.44 billion in 2020-21 and US$ 474.71 billion in 2019- 20). Hence, statement 1 is correct.

India's imports of iron and steel, chemical fertilizers and machinery have increased in the last few years. Hence, statement 2 is incorrect.

India's service exports during 2021-22 was US $ 254.5 billion (US$ 206.1 billion in 2020-21 and US$ 213.2 billion in 2019- 20) as compared to US $ 147.0 billion of imports during 2021- 22 (US$ 117.5 billion in 2020-21 and US $ 128.3 billion in 2019- 20). Hence, statement 3 is correct.

According to Economic Survey 2020-21, India's current account deficit (CAD) averaged 2.2 percent of GDP in the last 10 years. Continuity of higher merchandise trade deficit is the main reason behind this. However, India's current account balance witnessed a surplus of US $ 23.91 billion in 2020-21 due to COVID-19 pandemic. But again, it flipped into deficit of US $ 38.77 billion in 2021-22 due to sharp increase in merchandise trade deficit. Hence, statement 4 is correct. It is to be noted that UPSC has cancelled this question in its official answer key.

6. In 2011-12, data of external trade of India reached at about: [U.P.R.O/A.R.O. (Mains) 2014]

Correct Answer: (e) none of the above
Solution:According to the report of Department of Commerce, in Financial Year 2011-12 total external merchandise trade of India was at Rs. 3811360 crore. Hence, none of the options mentioned above is correct. As per PIB press release of the Ministry of Commerce and Industry (April, 2024), India's overall exports (Merchandise and Services combined) is expected to reach at US$ 776.68 billion in 2023-24 (P). India's overall exports stood at US$ 776.40 billion in 2022-23.

7. During 2011-12, the value of India's external trade was more than: [U.P.P.C.S. (Mains) 2015]

Correct Answer: (e) None of the above
Solution:According to the report of Department of Commerce, in Financial Year 2011-12 total external merchandise trade of India was at Rs. 3811360 crore. Hence, none of the options mentioned above is correct. As per PIB press release of the Ministry of Commerce and Industry (April, 2024), India's overall exports (Merchandise and Services combined) is expected to reach at US$ 776.68 billion in 2023-24 (P). India's overall exports stood at US$ 776.40 billion in 2022-23.

8. Which of the following statements is correct about 'India's Trade Gross Domestic Product' ratio? [U.P.R.O./A.R.O. (Mains) 2016]

Correct Answer: (e) None of the above
Solution:The Trade-to-GDP ratio is an indicator of the relative importance of international trade in the economy of a country. As per the World Bank data, since year 2000, Trade-to-GDP ratio of India has been more than 50% only in year 2008, 2011, 2012 and 2013. In year 2001 it was at 25.99% while in year 2007 it was at 45.69%. It was lowest in 1970 at 7.66%. As per the World Bank's latest data, India's Trade-to-GDP ratio was 40% in 2019 which was less than 44% in 2018 by 4 percentage points. It stood at 38% in 2020, 45% in 2021, 50% in 2022 and 46% in 2023. Thus, none of the given statements is correct.

9. India's total merchandise trade as a percentage of GDP has increased from 29.5% in 2004-05 to what percentage in 2012-13? [U.P. P.C.S. (Mains) 2014, U.P.R.O./A.R.O. (Mains) 2014]

Correct Answer: (b) 40.6%
Solution:As per the question period, option (b) was the nearest correct answer. According to the World Bank data, India's total merchandise trade as a percentage of GDP is reported at 35 percent and 31.1 percent in the year 2022 and 2023 respectively.

The cumulative value of merchandise exports during FY 2024-25 (April-March) was US$ 437.42 Billion, registering a positive growth of 0.08%, as compared to US$ 437.07 Billion during FY 2023-24 (April-March).
The cumulative Non-Petroleum exports in FY 2024-25 (April-March) valued at US$ 374.08 Billion registered an increase of 6.0% as compared to US$ 352.92 Billion in FY 2023-24
Major drivers of merchandise exports growth in FY 2024-25 (April-March) include Coffee, Tobacco, Electronic Goods, Rice, Jute Mfg. including Floor Covering, Meat, dairy & poultry products, Tea, Carpet, Plastic & Linoleum, RMG of all Textiles, Drugs & Pharmaceuticals, Cereal preparations & miscellaneous processed items, Mica, Coal & Other Ores, Minerals including processed minerals, Engineering Goods and Fruits & Vegetables.

10. The combined share of exports and imports of goods was 14.2 percent of GDP in 1990-91. In 2011-12 this share became: [U.P. P.C.S (Mains) 2013]

Correct Answer: (b) almost three times that of 1990-91
Solution:As per the question period, option (b) was the correct answer. According to the World Bank data, the combined share of exports and imports of goods (total merchandise trade) is at 31.1 percent of GDP in 2023.

India's Trade Scenario:

  • Total Export: Reached USD 820 billion in FY 2024-25, an increase of 5.5-6% over FY 2023-24.
  • Merchandise exports are estimated at USD 395.63 billion for April-February 2025, with full-year projections around USD 438 billion.
  • Total Imports: Estimated at USD 915 billion for FY 2024-25, up 6.9% from USD 675.44 billion (merchandise) in FY 2023-24, reflecting higher commodity prices and demand.
  • Services exports recorded USD 354.90 billion for April-February 2025, with a full-year estimate of USD 382-383 billion, reflecting a robust 12% growth from USD 341.1 billion in FY 2023-24.
  • Trade Deficit: Estimated at USD 94 billion for FY 2024-25, lower than USD 238.3 billion in FY 2023-24 due to import moderation and services export growth.
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