UPSC CSE Prelims
International Trade and Economic Organizations Previous Year Questions (PYQs)
Showing solved Previous Year Questions for Chapter: International Trade and Economic Organizations
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Consider the following statements in respect of the International Bank for Reconstruction and Development (IBRD):
I. It provides loans and guarantees to middle income countries.
II. It works single-handedly to help developing countries to reduce poverty.
III. It was established to help Europe rebuild after the World War II.
Which of the statements given above are correct?
Detailed Explanation:
Correct Answer: ✅ Option 3 (I and III only)
The International Bank for Reconstruction and Development is the largest institution of the World Bank Group. It was originally established to support post-war reconstruction and now focuses on development financing.
✅ Statement I is Correct: IBRD provides loans, guarantees, risk-management products, and advisory services primarily to middle-income and creditworthy lower-income countries.
❌ Statement II is Incorrect: IBRD does not work alone to reduce poverty. It works along with other World Bank Group institutions such as:
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International Development Association> (IDA)
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International Finance Corporation> (IFC)
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Multilateral Investment Guarantee Agency> (MIGA)
✅ Statement III is Correct: IBRD was established in 1944 at the Bretton Woods Conference to help rebuild Europe after World War II.
Short Notes: International Bank for Reconstruction and Development (IBRD)
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IBRD was established in 1944 under the Bretton Woods system.
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It is a key institution of the World Bank Group.
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Headquarters: Washington, D.C..
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Provides loans and guarantees to middle-income and creditworthy countries.
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Funds development projects in infrastructure, education, health, and governance.
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Raises funds mainly through international capital markets.
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Its original objective was the reconstruction of Europe after World War II.
Consider the following statements :
- India is a member of the International Grains Council.
- A country needs to be a member of the International Grains Council for exporting or importing rice and wheat.
Which of the statements given above is/are correct?
Detailed Explanation:
Answer: Option 1 — 1 only
This question tests knowledge about India's membership in international organizations related to grain trade and the prerequisites for international grain commerce. Let's evaluate each statement:
✅ Statement 1 – Correct: India is indeed a member of the International Grains Council (IGC), which serves as a platform for international cooperation on grain market issues.
❌ Statement 2 – Incorrect: Membership in the IGC is not mandatory for countries to export or import rice and wheat; non-member countries can freely engage in grain trade based on bilateral agreements and WTO regulations.
📝 Short Notes: International Grains Council (IGC)
- Establishment: Founded in 1949 as the International Wheat Council, renamed to IGC in 1995 to reflect expanded scope beyond wheat.
- Headquarters: London, United Kingdom.
- Membership: Comprises both exporting and importing countries; India is a member nation.
- Purpose: Serves as a forum for intergovernmental consultation and cooperation on grain market matters, provides market information, and promotes international collaboration.
- Functions: Market analysis and reporting, facilitating dialogue between grain producers and consumers, providing statistical data on global grain markets.
- Key Point: IGC membership is voluntary and not a prerequisite for engaging in international grain trade; countries can trade grains based on WTO rules and bilateral/multilateral agreements.
- Grains Covered: Primarily focuses on wheat, maize (corn), barley, sorghum, and rice.
Rapid Financing Instrument and "Rapid Credit Facility" are related to the provisions of lending by which one of the following?
Detailed Explanation:
Answer: Option 2 — International Monetary Fund
Both Rapid Financing Instrument (RFI) and Rapid Credit Facility (RCF) are emergency lending facilities provided by the International Monetary Fund (IMF) to member countries facing urgent balance of payments needs. The RFI is available to all IMF member countries requiring rapid financial assistance without the need for a full-fledged program, while the RCF is a concessional lending facility specifically designed for low-income countries that are members of the Poverty Reduction and Growth Trust (PRGT).
📝 Short Notes: IMF Emergency Lending Facilities
| Feature | Rapid Financing Instrument (RFI) | Rapid Credit Facility (RCF) |
|---|---|---|
| Eligibility | All IMF member countries | Low-income countries (PRGT-eligible) |
| Interest Rate | Market-based (non-concessional) | Zero interest rate (concessional) |
| Purpose | Urgent balance of payments needs | Urgent balance of payments needs |
| Conditionality | Minimal, no full program required | Minimal, no full program required |
| Disbursement | Outright, single disbursement | Outright, single disbursement |
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The term 'West Texas Intermediate', sometimes found in news, refers to a grade of
Detailed Explanation:
Answer: Option 1 — Crude oil
West Texas Intermediate (WTI) is a grade of crude oil that serves as a major benchmark for oil pricing, particularly in North America. It is classified as light, sweet crude oil due to its low density and low sulfur content, making it highly desirable for refining into gasoline and other petroleum products.
📝 Short Notes: Global Crude Oil Benchmarks
| Benchmark | Origin | Characteristics | Geographic Coverage |
|---|---|---|---|
| West Texas Intermediate (WTI) | United States (Cushing, Oklahoma) | Light, sweet crude (low sulfur, low density) | North America pricing benchmark |
| Brent Crude | North Sea (between UK and Norway) | Light, sweet crude | Global benchmark (Europe, Asia, Africa) |
| Dubai/Oman Crude | Middle East | Medium sour crude | Asia-Pacific pricing benchmark |
| OPEC Basket | Weighted average of OPEC nations | Mix of light and heavy crudes | OPEC reference price |
- Light vs Heavy Crude: Refers to API gravity (density); light crude has higher API gravity and is easier to refine.
- Sweet vs Sour Crude: Based on sulfur content; sweet crude has less than 0.5% sulfur, making it cleaner and more valuable.
- Price Differential: WTI and Brent prices often differ due to supply-demand dynamics, transportation costs, and regional factors.
- Strategic Importance: Crude oil prices impact global inflation, currency values, trade balances, and economic growth, making these benchmarks crucial for economic planning.
“Gold Tranche” (Reserve Tranche) refers to
Detailed Explanation:
Answer: Option 4 — a credit system granted by IMF to its members
The Reserve Tranche (formerly called Gold Tranche) represents the first 25% of a member country's quota with the IMF that can be withdrawn automatically without conditions, interest, or IMF approval. It acts as an unconditional credit facility available to member nations facing balance of payments difficulties, making it distinct from regular IMF lending programs which require strict conditionalities.
📝 Short Notes: IMF Reserve Tranche and Member Quotas
- Reserve Tranche: The portion of a country's IMF quota (typically 25%) that can be accessed unconditionally, without interest charges or policy conditions. Previously termed "Gold Tranche" when quotas were partly paid in gold.
- IMF Quota System: Each member country is assigned a quota based on its relative size in the global economy, which determines its financial commitment to the IMF, voting power, and access to IMF financing.
- Quota Composition: Members pay their quota partly in Special Drawing Rights (SDRs) or widely accepted currencies (reserve tranche position) and partly in their own currency.
- Automatic Drawing Rights: Unlike credit tranches which require IMF approval and conditionalities, the reserve tranche can be drawn immediately when needed for balance of payments support.
- No Interest Charges: Drawings from the reserve tranche do not incur interest or service charges, distinguishing it from other IMF lending facilities.
- Voting Rights: A country's quota also determines its voting power in IMF decisions, with larger economies having proportionally greater influence.
With reference to the Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct?
- Quantitative restrictions on imports by foreign investors are prohibited.
- They apply to investment measures related to trade in both goods and services.
- They are not concerned with the regulation of foreign investments.
Select the correct answer using the code given below:
Detailed Explanation:
Answer: Option 3 — 1 and 3 only
The Trade-Related Investment Measures (TRIMS) agreement under WTO prohibits investment measures that restrict and distort trade in goods. It addresses measures like quantitative restrictions on imports and local content requirements but does not regulate foreign investment per se or extend to services.
✅ Statement 1 – Correct: TRIMS prohibits quantitative restrictions on imports by foreign investors, such as mandatory local sourcing requirements that distort free trade in goods.
❌ Statement 2 – Incorrect: TRIMS applies only to investment measures related to trade in goods, not services. Trade in services is governed by the General Agreement on Trade in Services (GATS).
✅ Statement 3 – Correct: TRIMS is not concerned with regulating foreign investment itself; it focuses on investment measures that affect trade in goods, ensuring they do not create trade barriers.
📝 Short Notes: TRIMS Agreement
- Full Form: Trade-Related Investment Measures
- Part of: World Trade Organization (WTO) framework, came into effect in 1995
- Scope: Applies only to investment measures affecting trade in goods, not services
- Prohibited Measures: Local content requirements, trade-balancing requirements, foreign exchange restrictions related to imports, and export restrictions
- Objective: To eliminate investment measures that cause trade-distorting effects inconsistent with GATT Articles III (National Treatment) and XI (Prohibition of Quantitative Restrictions)
- Not Covered: Does not regulate foreign investment policies directly; does not cover performance requirements unrelated to trade
- Relation to Services: GATS (General Agreement on Trade in Services) governs trade in services, not TRIMS
Which one of the following is not a sub-index of the World Bank’s “Ease of Doing Business Index”?
Detailed Explanation:
Answer: Option 1 — Maintenance of law and order
The World Bank's Ease of Doing Business Index (discontinued in 2021) measured regulatory efficiency through 10 specific sub-indices that quantified business regulations. Maintenance of law and order, while essential for economic activity, was not one of these measurable indicators. The index focused on specific procedural aspects like paying taxes, registering property, and dealing with construction permits—all of which were official sub-indices.
📝 Short Notes: Ease of Doing Business Index
- Nature: Annual ranking by World Bank measuring business regulation quality and enforcement across 190 economies (discontinued in 2021)
- 10 Sub-Indices: (1) Starting a Business, (2) Dealing with Construction Permits, (3) Getting Electricity, (4) Registering Property, (5) Getting Credit, (6) Protecting Minority Investors, (7) Paying Taxes, (8) Trading Across Borders, (9) Enforcing Contracts, (10) Resolving Insolvency
- Methodology: Each indicator measured specific procedures, time, cost, and legal requirements businesses face
- India's Performance: India improved from 142nd rank (2014) to 63rd rank (2020) through reforms like GST, IBC, and digital initiatives
- Discontinuation: World Bank discontinued the index in 2021 following data irregularities and methodology concerns
The Global Competitiveness Report is published by the
Detailed Explanation:
Answer: Option 3 — World Economic Forum
The Global Competitiveness Report (GCR) is an annual publication by the World Economic Forum (WEF) that assesses the competitiveness of countries based on various economic indicators such as infrastructure, macroeconomic stability, health, education, market efficiency, innovation, and institutional strength. The WEF, based in Geneva, Switzerland, uses this report to provide insights into the drivers of productivity and long-term economic growth.
Why other options are incorrect:
❌ Option 1 – International Monetary Fund: The IMF focuses on macroeconomic policies, financial stability, and global monetary cooperation but does not publish the Global Competitiveness Report.
❌ Option 2 – United Nations Conference on Trade and Development: UNCTAD deals with trade, investment, and development issues but is not responsible for the GCR.
❌ Option 4 – World Bank: The World Bank publishes reports on economic development and business environments (like the Ease of Doing Business Report) but not the Global Competitiveness Report.
📝 Short Notes: Major International Economic Reports and Publishers
| Report/Index | Publishing Organization | Focus Area |
|---|---|---|
| Global Competitiveness Report | World Economic Forum (WEF) | National competitiveness based on productivity and growth factors |
| World Development Report | World Bank | Economic development and poverty reduction |
| World Economic Outlook | International Monetary Fund (IMF) | Global economic trends and forecasts |
| Human Development Report | United Nations Development Programme (UNDP) | Human development indicators (health, education, income) |
| Trade and Development Report | United Nations Conference on Trade and Development (UNCTAD) | Trade, investment, and development issues |
| Ease of Doing Business Report | World Bank (discontinued in 2021) | Business regulatory environment |
Consider the following statements:
- India has ratified the Trade Facilitation Agreement (TFA) of WTO.
- TFA is a part of WTO’s Bali Ministerial Package of 2013.
- TFA came into force in January 2016.
Which of the statements given above is/are correct?
Detailed Explanation:
Answer: Option 1 — 1 and 2 only
The Trade Facilitation Agreement (TFA) is a multilateral deal aimed at simplifying customs procedures, reducing costs, and improving speed and efficiency of trade. India ratified this agreement, which was a key component of the WTO's Bali Ministerial Package of 2013. However, the TFA came into force in February 2017 (not January 2016), after receiving ratification from two-thirds of WTO members.
✅ Statement 1 – Correct: India has ratified the Trade Facilitation Agreement (TFA) of WTO, demonstrating its commitment to streamlining trade procedures.
✅ Statement 2 – Correct: The TFA is indeed a part of the WTO's Bali Ministerial Package of 2013, which was agreed upon at the Ninth Ministerial Conference in Bali, Indonesia.
❌ Statement 3 – Incorrect: The TFA came into force in February 2017, not January 2016, after two-thirds of WTO members completed their ratification process.
Which of the following gives the ‘Global Gender Gap Index’ ranking to the countries of the world?
Detailed Explanation:
Answer: Option 1 — World Economic Forum
The Global Gender Gap Index is an annual report published by the World Economic Forum (WEF) since 2006. It measures gender-based disparities across four key dimensions: Economic Participation and Opportunity, Educational Attainment, Health and Survival, and Political Empowerment. The index ranks countries based on their progress towards gender parity, with scores ranging from 0 (complete disparity) to 1 (complete parity). India's ranking has varied over the years, typically placing in the lower half among assessed nations. The report is released annually as part of WEF's global initiatives on inclusive growth.
The term ‘Digital Single Market Strategy’ seen in the news refers to -
Detailed Explanation:
Answer: Option 3 — EU
The Digital Single Market Strategy is a flagship initiative of the European Union (EU) launched in 2015 to create a unified digital market across all 28 member states. This strategy aims to remove regulatory barriers, ensure better access to digital goods and services, and create a level playing field for digital businesses across Europe. It focuses on areas like e-commerce, data protection, digital copyright, and reducing geo-blocking to foster innovation and economic growth in the European digital economy.
Consider the following statements:
- The Standard Mark of Bureau of Indian Standards (BIS) is mandatory for automotive tyres and tubes.
- AGMARK is a quality Certification Mark issued by the Food and Agriculture Organisation (FAO).
Which of the statements given above is/are correct?
Detailed Explanation:
Answer: Option 1 — 1 only
✅ Statement 1 – Correct: The Bureau of Indian Standards (BIS) Standard Mark is mandatory for automotive tyres and tubes as per BIS regulations to ensure quality and safety standards.
❌ Statement 2 – Incorrect: AGMARK is a quality certification mark issued by the Directorate of Marketing and Inspection (DMI), Government of India, not by the Food and Agriculture Organisation (FAO).
The Global Infrastructure Facility is a/an -
Detailed Explanation:
Answer: Option 2 — World Bank collaboration that facilitates the preparation and structuring of complex infrastructure Public-Private Partnerships PPPs to enable mobilization of the private sector and institutional investor capital.
The Global Infrastructure Facility (GIF) is a partnership led by the World Bank Group that brings together governments, multilateral development banks, private sector investors, and financiers to design and structure bankable infrastructure projects. It specifically focuses on facilitating complex infrastructure Public-Private Partnerships (PPPs) in emerging markets and developing economies to mobilize private sector and institutional investor capital. The GIF provides technical advisory support and works to ensure that infrastructure projects are properly structured to attract private investment, making Option 2 the correct answer.
Recently, which one of the following currencies has been proposed to be added to the basket of IMF’s SDR?
Detailed Explanation:
Answer: Option 4 — Renminbi
The Chinese Renminbi (RMB/Yuan) was added to the IMF's Special Drawing Rights (SDR) basket in October 2016, becoming the fifth currency alongside the US Dollar, Euro, Japanese Yen, and British Pound Sterling. This inclusion recognized China's growing role in global trade and finance. The SDR basket is reviewed every five years by the IMF to reflect currencies' relative importance in international transactions. Among the given options, only the Renminbi has been recently proposed and successfully added to the SDR basket, marking a significant milestone in international monetary cooperation.
In the context of which of the following do you sometimes find the terms ‘amber box, blue box and green box’ in the news?
Detailed Explanation:
Answer: Option 1 — WTO affairs
The terms 'amber box,' 'blue box,' and 'green box' are classification categories used in the World Trade Organization's Agreement on Agriculture to categorize domestic agricultural subsidies based on their trade-distorting effects. The Amber Box includes trade-distorting subsidies like price support and input subsidies that are subject to reduction commitments. The Blue Box contains subsidies tied to production-limiting programs that are exempt from reduction commitments. The Green Box covers minimally trade-distorting subsidies such as government services, food security programs, and environmental protection measures that are permitted without limits. These classifications are central to WTO negotiations on agricultural trade liberalization and subsidy disciplines.
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