part 2 Indian Economy 2022.pptx

INTERNATIONAL TRADE(आंतरराष्ट्रीय
व्यापार)
• BoP and its components.(व्यापारतोल)
• Concept of CAD, Twin Deficit.(चालू खात्यावरील तूट)
• Convertibility of Rupee & CAC(रुपयाची पररवततनियता)
• FDI, FPI, Related issues(ववदेशी गंतवणूक)
• Exchange Rate regimes
• IMF, World Bank
• WTO & related aspects in detail
• FTP 2015-20 (ववदेशी व्यापार िीती)

MCQs
1.The balance of payments of a country is a systematic record of (2013)
(a) All import & export transactions of a country during a given period of time,
normally a year.
(b) Goods exported from a country during a year.
(c) Economic transaction between the government of one country to another.
(d) Capital movements from one country to another.
2. Which of the following does not form part of current account of BoP? [CDS-2014]
(a) Export and import of goods (b) Export and import of services
(c) Income receipts and payments (d) Capital receipts and payments
3. With reference to Balance of Payments, which of the following constitutes/
constitute the Current Account? (2014)
1. Balance of trade. 2. Foreign assets. 3. Balance of invisibles. 4. Special Drawing
Rights.
(a) 1 only (b) 2 and 3 (c) 1 and 3 (d) 1, 2 and 4

MCQs
4. Among the following, which one of the following is the largest exporter of rice in the world
in the last five years? (Pre19)
(a) China (b) India (c) Myanmar (d) Vietnam
5. Among the agricultural commodities imported by India, which one of the following
accounts for the
highest imports in terms of value in the last five years? (Pre19)
(a) Spices (b) Fresh fruits (c) Pulses (d) Vegetable oils
6. Since 2014-15,India has consistently run trade surplus with which one among the following
countries?(CDS2020) (a) China (b) Saudi Arabia (c) USA (d) Germany
7. Find correct statement(s) about international trade of India at present? (2020)
1. India’s merchandise exports are less than its merchandise imports.
2. India’s imports of iron and steel, chemicals, fertilisers 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.
[a) 1 and 2 only [b) 2 and 4 only [c) 3 only [d) 1, 3 and 4 only

MCQs
8. Consider the following statements: (2020)
1. The value of Indo-Sri Lanka trade has consistently increased in the last decade.
2. “Textile and textile articles” constitute an important item of the trade between India and Bangladesh.
3. In the last five years, Nepal has been the largest trading partner of India in South Asia.
Codes: [a) 1 and 2 only [b) 2 only [c) 3 only [d) 1, 2 and 3
9. Which of the following are the main objectives of Gold Monetization Scheme launched in the country ?
(IEnggS-2018)
1. To monetize gold holdings in the country 2. To increase export of gold from the country
3. To reduce India’s import bill 4. To meet the targets of reduction in fiscal deficit
Answer Codes: (a) 1 and 4 only (b) 2 and 4 only (c) 2 and 3 only (d) 1 and 3 only
10. What is/are the purpose/purposes of Government's 'Sovereign Gold Bond Scheme' and 'Gold
Monetization Scheme’? (2016)
1.To bring the idle gold lying with Indian households into the economy.
2. To promote FDI in the gold and jewellery sector.
3. To reduce India's dependence on gold imports.
Answer codes: (a) 1 only (b) 2 and 3 (c) 1 and 3 (d) 1, 2 and 3

We’ve large Trade Deficit with China (cheap electronics, toys etc.) Switzerland (Gold, Luxury
items), Middle Eastern nations (Oil).
We’ve Trade Surplus with USA (Chemicals, textile, services etc.), UAE (Tea, Spices, textile etc.)
- India’s top five trading partners are USA, China, UAE, Saudi Arabia and Hong Kong
- India receives largest amount of remittance > China > Mexico

• India's current account in the balance of
payments ended in a surplus to the extent
of 0.9 per cent of GDP in FY '21 for the
first time in 17 years as trade deficit
narrowed due to contraction in pandemic
induced import demand. But as the economy
opened up in the latter parts of the year,
the fourth quarter ending March'21 ended
in a deficit.

• Twin Deficit
• Role of Sovereign Gold Bonds & CAD

SGB( 2015)
• - Sovereign gold bonds are issued by the RBI on behalf of the government.
• They are government securities denominated in grams of gold which are substitutes for holding physical gold.
- 6 tranche in 2021
• The nominal value of the 8-year bond is Rs 4,777 per gram of gold, based on the simple average closing price on the last three business days of the week
preceding the subscription period of Series I.
• Gold bonds bear interest at a fixed rate of 2.50% per annum on the amount of initial investment which will be credited semi-annually.
• These bonds are sold through offices or branches of nationalised banks, private banks, foreign banks, designated post offices, Stock Holding Corporation of
India Ltd., the authorised stock exchanges etc.
• What are the minimum and maximum limits for investment?
• The bonds are issued in denominations of 1 gram of gold and in multiples thereof.
• The minimum investment will be 1 gram, with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for
trusts.
• Can these securities be used as collateral for loans?
• They can be used as collateral for loans from banks, financial Institutions and non-banking financial companies (NBFC).
• The loan-to-value ratio will be the same as applicable to ordinary gold loans prescribed by RBI from time to time.
• Granting loans against SGBs would be subject to the decision of the bank/financing agency, and cannot be inferred as a matter of right.
• What are the tax implications?
• Interest on the bonds will be taxable as per the provisions of the Income-Tax Act, 1961 (43 of 1961).
• But the capital gains tax arising on redemption of SGB to an individual has been exempted
• What will investors get on redemption?
• Investors gain from appreciation in gold prices as redemption of bonds will be based on the then prevailing prices.
• If gold prices rise, the investor will get the higher prices plus the 2.5% interest and vice-versa.
• On maturity, the gold bonds will be redeemed in Indian rupees and the redemption price will be based on a simple average of closing price of gold of the
previous 3 business days from the date of repayment.
• Although the tenure of the bond is 8 years, early redemption of the bond is allowed after the fifth year, on coupon payment dates.
• The bond will be tradable on exchanges, if held in demat form and can also be transferred to any other eligible investor.
• Why should investor buy gold bonds rather than physical gold?
• The quantity of gold the investor pays for is protected, since he receives the ongoing market price at the time of redemption/premature redemption.
• These bonds offer a superior alternative to physical gold as the risks and costs of storage are eliminated.
• Investors are assured of the market value at the time of maturity, and periodical interest.
• Also these bonds are free from issues like jewellery making charges and purity, risk of loss of scrip etc

CURRENCY EXCHANGE SYSTEM
• FOREX
• Fixed, Floating, Mixed
• Convertibility of Rupee
• Full Convertibility of Rupee- Pros & Cons
• Devaluation of Rupee
• REER, NEER

MCQs
1. Under flexible exchange rate system, the exchange rate is determined by
[UPSC-CDS-2015]
(a) predominantly by market mechanism
(b) by the Central Bank
(c) as a weighted index of a group of currencies
(d) by the World Trade Organization
2. The price of any currency in international market is decided by(2012)
1. The World Bank.
2. Demand for goods/services provided by the country concerned.
3. Stability of the government of the concerned country.
4. Economic potential of the country in question.
Answer codes: (a) 1, 2, 3 and 4 (b) 2 and 3 (c) 3 and 4 (d) 1 and 4

MCQs
3. Recently, which one of the following currencies has been proposed to be added to
the basket of IMF's SDR? (UPSC-Pre-2016)
(a) Rouble (b) Rand (c) Indian Rupee (d) Renminbi
4. Convertibility of rupee implies:(UPSC-Pre-2015)
(a) being able to convert rupee notes into gold.
(b) allowing the value of rupee to be fixed by market forces.
(c) freely permitting the conversion of rupee to other currencies and vice versa.
(d) developing an international market for currencies in India.
5.If another global financial crisis happens in the near future, which of the following
actions/policies are most likely to give some immunity to India? (Prelims-2020)
1. Not depending on short-term foreign borrowings
2. Opening up to more foreign banks
3. Maintaining full capital account convertibility
• Codes: [a) 1 only [b) 1 and 2 only [c) 3 only [d) 1, 2 and 3

MCQs
6. In the context of India, which of the following factors is/are
contributor/contributors to reducing the risk of a currency crisis? ( 2019)
1. The foreign currency earnings of India’s IT sector.
2. Increasing the government expenditure.
3. Remittances from Indians abroad.
(a) 1 only (b) 1 and 3 only (c) 2 only (d) 1,2 and 3 only
7. Which one of the following is not the most likely measure the
Government/RBI takes to stop the slide of Indian rupee? (Pre-2019)
(a) Curbing imports of non-essential goods and promoting exports
(b) Encouraging Indian borrowers to issue rupee denominated Masala bonds
(c) Easing conditions relating to external commercial borrowing
(d) Following an expansionary monetary policy

MCQs
• 8. Find correct statement(s) (UPSC-Prelims-2020)
1. Purchasing Power Parity (PPP) exchange rates are calculated by the
prices of the same basket of goods and services in different countries.
2. In terms of PPP dollars, India is the sixth largest economy in the world.
• Codes: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2

RBI’s FOREX
The Forex Reserve component(s) in decreasing order of size =
1) Foreign Currency Assets (includes foreign currencies & G-Sec/bonds
of foreign Govts)
2) Gold
3) Reserve Tranche Position (RTP) in the IMF.
4) Special Drawing Right (SDR) of International Monetary Fund

TYPES
1. Fixed/Pegged Exchange Rate: When the central bank of a country itself
decides the exchange rate of local currency to foreign currency e.g.
People’s Bank of China (PBC) $1 = 6 Yuan. - If excess dollars are entering in
their market, the central bank will print more Yuan to buy and absorb the
excess dollars, to ensure Yuan doesn’t strengthen against Dollar ($1=6 → 5
Yuan). As a result their forex reserve will get large build up of dollars, due
to central bank’s purchase. - In future, if less dollars are entering in their
market, the central bank will sell the (previously acquired) dollars from its
forex reserve to ensure Yuan doesn’t weaken.
2. Floating/Flexible Exchange Rate: The exchange rate is determined by the
market forces of demand and supply. - So if there are more number of
Indian people wanting to import crude oil, gold, iphones;/ going to USA
for higher studies,... Compared to the number of Americans interested to
buy Indian goods, services; / coming to vacation in Kerala - Then, demand
for dollars will be more than that of rupees. So, $1 = 50 → $1=70

Managed Float / Dirty Float
- It is the middle path between the two extremes (floating and fixed).
- RBI will not decide the exchange rate (unlike the fixed system). In the
ordinary days, RBI will let the market forces of supply and demand
decide the exchange rate. But if there is too much volatility, then RBI
will intervene to buy / sell $ to keep the volatility .
www.satishdhage.com You Tube- Current Affairs with Satish Dhage

Historical Aspects: Fixed Exchange Rate- Gold Standard
• USA would issue $1 note, if only it has 14 grams of gold in reserve, whereas
England would issue one pound note if only it has 73 grams of gold in its
reserve. Accordingly, their exchange rate will be 1 Pound =73/14 = ~5 USD.
• - And, each Central Bank Governor has promised to convert their currency
into gold at a fixed amount. So, a person could walk with paper currency &
demand gold coins/biscuits in return.
• - When the gold mining production declined, nations gradually shifted to
‘bimetallism’ e.g. $1 promised with 14 gm gold or 210 gm of silver
whichever available with their Central Bank.
• This system collapsed during the First World War (WW1) because the
nation’s currency printing capacity was limited by their gold reserve, but
their governments were more eager to print more money to finance the
war (soldiers’ salaries, rifles’ ammunition etc.)

Historical Aspects: Fixed exchange rate system: Bretton Woods System (1946-
1971)
• USA agreed to fix price of its $1 = (1/35) ounces of gold. [1 ounce = 28
grams]. USA allowed free convertibility of Dollar to Gold. So if a person
walked into the US Federal Reserve with $35, their chairman (Governor)
will give him one ounce of gold.
• ⇒ Then IMF fixed the exchange rate of every country's currency against
USA. e.g.₹ 1= $0.30 =~0.24 grams of Gold. So, that implied India can’t issue
more currency If Indian RBI does not have proportionately sufficient gold
reserve of its own. Still if RBI issues more currency,International Monetary
Fund will order India to devalue its rupee exchange rate against dollar.
• 1971: USA President Robert Nixon pulled out of Bretton Woods gold
convertibility system,mainly because he wanted freedom to print more
dollars to finance the Cold War and arms race against the USSR
• Thus, USA shifted to “Floating Exchange System”. Eventually most of the
nations also shifted in that either floating / managed-floating system

India
• 1935 onwards: Proportional Reserve. RBI must keep ~40% gold to the value of
currency issued. British govt fixed exchange rate.
• 1946 onwards: Bretton Woods / IMF system of fixed exchange rate. Wherein price
was fixed (pegged) against dollar, and dollar price was fixed (pegged) against gold.
• 1956 onwards: While RBI could issue any amount of Indian currency but that has to
be balanced by the Assets of the issue department ( M0). Of course, if RBI printed
too much currency backed by only Indian G-sec but (without adequate Gold / Forex
Reserve, then IMF may force devaluation against Dollar). So, we adopted
“Minimum Reserve System” i.e. RBI must keep -
400 crore of foreign currency/security + ‘x’ crore worth gold.
• Towards Managed Floating Exchange Rate →
✓ 1995 onwards: “Minimum Reserve System is continued but RBI is required to only
keep ’x’ crores worth of gold. No compulsion for RBI to keep additional 400 crore
worth foreign currency or foreign securities. RBI can print as much currency it wants
as long as its balanced by the Assets of Issue Dept. (such as Indian G-sec, Foreign
Securities, Gold etc.)

Convertibility of Rupee- Capital Account
- India- Managed Float system
• RBI puts certain restrictions on the convertibility of Indian rupee to
foreign currency using the powers conferred under Foreign Exchange
Management Act, 1999
• Restriction on Convertibility of Rupee: RBI’s ECB ceiling is up to $750
million (or equivalent other currency) per year for Indian Companies.
- An FPI can’t invest in more than 5% of available G-sec in the Indian
market and more than 20%of the available corporate bonds in the
Indian market.
- FDI sector wise restrictions.
Thus, Indian rupee is not fully convertible on capital account
transactions

Convertibility of Rupee- Current Account
• - Indian rupee is considered fully convertible on current account
transactions (i.e. Import and export, remittance, income transfer gift
and donations) since 1994.

Full Convertibility of Rupee
• India should permit unrestricted conversion of Indian to foreign currency for both current
account and capital account transactions. → more FDI investment in India → NPA problem
solved, new factories, jobs, GDP growth, rivers of honey and milk will flow.
• Anti-Arguments:
- Before 1997, East Asian “Tiger” economies: (South Korea, Indonesia, Malaysia,
Thailand,Vietnam Philippines etc.) allowed full capital account convertibility to attract FDI.
- But 1997: Their automobile & steel companies filed bankruptcy → The foreign investors
panicked, sold their shares and bonds → got local currency → converted into $ and ran
away.
The flight of this ‘HOT MONEY’ resulted into extreme depreciation of local currency $1 =
2000.Indonesian Rupiah → $1= 18,000 Indonesian Rupiah → heavy inflation in petrol
diesel →social unrest, riots and political instability. None of their central banks had
enough forex reserve to combat this crisis.
-1998: their GDP growth rates fell in negative territory e.g. Indonesia (-13.7%) Because of
their mistake of allowing full currency convertibility. Whereas India and China grew at 6-8%
because we had not allowed it.

- SS Tarapore Comittee suggested India to allow full Capital
Account Convertibility (CAC) only when the fundamentals of
our economy become strong enough, such as:
- ⇒ RBI must have enough forex to sustain 6 months’ import
• ⇒ Fiscal deficit must not be more than 3.5% of GDP
• ⇒ Inflation must not be more than 3-5%
• ⇒ Banks’ NPA must not be more than 5% of their total assets.
And so forth. So, time is not yet ripe for allowing full CAC.

LERMS
• 2004 → Liberalised Remittance Scheme
• Indian resident (incl. minor) is allowed to take out upto $2,50,000 (or
its equivalents in othercurrencies) from India. He may use it for either
current account or capital account transaction as per his wish. (e.g.
paying for college fees abroad, buying shares, bonds, properties, bank
accounts abroad.)
• Controversy? Panama papers allege certain Bollywood celebrities
used LRS window to shift money from India in their shell companies in
tax havens → later used those shell companies for tax avoidance.
• ⇒ 2016 onwards: RBI began relaxing the norms for External
Commercial Borrowing (ECB),mainly to soften the NPA problem e.g.
Software cos. can bring up to $200 million in ECB,Microfinance $500
mill, Infra.cos $750 mill etc.

NEER, REER
• 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).
• ⇒ 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 levels in India and those foreign
countries, it’s called “Real effective exchange rate (REER)”.
⇒ REER interpreted as the quantity of domestic goods required to purchase one unit of a given
basket of foreign goods.
• ⇒ 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 or not.

• Meaning
• Impacts- Export + VE
Imports –ve
• Major devaluation
• 26 Sep 1949 (30.5%)
• 06 Jun 1966 (36.5%)
• 1, 3 & 15 Jul 1991 (20%)
Devaluation of Rupee

Advantages of Devaluation
• Increases exports
• Decreases Imports
• Decreases Trade Deficit & CAD
• Improves BoP
• Increases Foreign remittances & foreign tourism

Disadvantages of Devaluation
• Inflationary
• Cost Push inflation( more dollars, imported )
• Increase ext debt
• Reduces purchasing power

NEER, REER
- NER
- RER
- NEER
- REER
• 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).
• ⇒ 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 levels in India and those foreign
countries, it’s called “Real effective exchange rate (REER)”.
⇒ REER interpreted as the quantity of domestic goods required to purchase one unit of a given
basket of foreign goods.
• ⇒ 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 or not.

Agriculture
• Significance of Agriculture in Economy
• Agri Inputs
• Agri Financing
• Green Revolution & Rainbow Revolution
• PDS system & related terms
• NFSA, 2013
• PMFBY, 2016
• PMKSN ( 2019)
• 3 Agricultural laws

Agriculture MCQs
1. Which of the following are responsible for the decrease of per capita holding of
cultivated land in India? (CDS-2012)
1. Low per capita income. 2. Rapid rate of increase of population.
3. Practice of dividing land equally among the heirs. 4. Use of traditional techniques of
ploughing.
Answer Codes: (a) 1 and 2 (b) 2 and 3 (c) 1 and 4 (d) 2,3 and 4
2. Which one of the following best describes the main objective of Seed Village
Concept? (UPSC-2015)
(a) Encouraging the farmers to use their own farm seeds and discouraging them to buy
the seeds from others.
(b) Involving the farmers for training in quality seed production and thereby to make
available quality seeds to others at appropriate time and affordable cost.
(c) Earmarking some villages exclusively for the production of certified seeds.
(d) Identifying the entrepreneurs in villages and providing them technology and
finance to set up seed companies.

Agriculture MCQs
3. Find correct statement(s): (UPSC-2020)
1) 36% of India’s districts are classified as “overexploited” or “critical” by the CGWA.
2) Central Ground Water Authority (CGWA) was formed under the Environment (Protection) Act.
3) India has the largest area under groundwater irrigation in the world.
Codes: [a) 1 only [b) 2 and 3 only [c) 2 only [d) 1 and 3 only
4. Why does the Govt promote the use of Neem-coated Urea’ in agriculture? (Prelims-2016)
(a) Release of Neem oil in the soil increases nitrogen fixation by the soil microorganisms
(b) Neem coating slows down the rate of dissolution of urea in the soil
(c) Nitrous oxide, a greenhouse gas, is not at all released into atmosphere by crop fields
(d) It is a combination of a weedicide and a fertilizer for particular crops.
5. Find correct statement(s) about chemical fertilizers in India (Prelims-2020)
1) At present, the retail price of chemical fertilizers is market-driven and not administered by the
Government.
2) Ammonia, which is an input of urea, is produced from natural gas.
3) Sulphur, which is a raw material for phosphoric acid fertilizer is a by-product of oil refineries.
Codes: [a) 1 only [b) 2 and 3 only [c) 2 only [d) 1, 2 und 3

Agriculture MCQs
6. The substitution of steel for wooden ploughs in agricultural production is an example of _ _ technological progress. (2015)
(a) labour-augmenting (b) capital-augmenting (c) capital-reducing (d) None of the above.
7. Private investment in Indian agriculture is mostly on labour saving mechanization. This could be a response to (CDS-2015)
a) rising productivity of agricultural sector
(b) rising inequality in agriculture
(c) rising wages and tighter labour market
(d) debt write-off by the Government
8. In India, markets in agricultural products are regulated under the (UPSC-Pre-2015)
(a) Essential Commodities Act, 1955
(b) Agricultural Produce Market Committee Act enacted by States
(c) Agricultural Produce (Grading and Marking) Act, 1937
(d) Food Products Order, 1956 and Meat and Food Products Order, 1973
9. What is/are the advantage/advantages of implementing the 'National Agriculture Market' scheme?(Pre-2017)
a) It is a pan-India electronic trading portal for agricultural commodities.
b) It provides the farmers access to nationwide market, with prices commensurate with the quality of their produce.
c) Both a and b
d) Neither a nor b
10. Consider the following:(UPSC-Pre-2018)
1. Areca nut 2.Barley 3.Coffee 4.Finger millet 5.Groundnut 6.Sesamum 7.Turmeric
The Cabinet Committee on Economic Affairs announces MSP for which of the above?
(a) 1, 2, 3 and 7 only (b) 2, 4, 5 and 6 only
(c) 1, 3, 4, 5 and 6 only (d) 1, 2, 3, 4, 5, 6 and 7

MCQ on Agriculture
11.Consider the following groups of crops and select the ones that are covered under
Pradhan Mantri Fasal Bima Yojana-
1.Food crops (Cereals, Millets and Pulses)
2.Oilseeds
3.Annual Commercial / Annual Horticultural crops
4. All spices
a.) 1, 2 and 3 b.) 1, 2, 3 and 4
c.) 1 and 2 only d.) 1, 3 and 4
12. In which of the following crop, India is the largest producer and the largest consumer; at
the same time a net importer?
a.) Rice b.) Wheat c.) Pulses d.) Sugarcane
13. Krishi Vigyan Kendras are established by:
a.) NABARD b.) Ministry of Agriculture
c.) District Cooperative Banks d.) Indian Council for Agricultural Research

MCQ on Agriculture
14. Choose the correct statements about Commission for Agricultural Costs and Prices:
I. Statutory and Advisory body
II. Make recommendation for both Kharif and Rabi crops.
a.) Only I is correct b.) Only II is correct c.) Both are correct d.) Neither I nor II is correct
15. Which of the following has adverse trends are existing in fertilizer use in India? choose the correct answer using
the codes given below.
I. Comparatively low price of urea has caused its excess use
II. Import dependence
III. Lack of awareness among farmers about nutrient content and optimum use
a.) Only I is correct b.) Only I and II are correct c.) II and III are correct d.) I, II and III are correct
16. . ‘More crop per drop’ is associated with:
a.) Acclerated Irrigation Benefit Programme
b.) Pradhan Mantri Krishi Sinchayee Yojana
c.) Integrated Watershed Management Programme
d.) Paramparagat Krishi Vikas Yojana
17. The largest pulse producing state in India is:
a.Rajasthan b.Maharashtra c.Punjab d.M.P.

Indian Agriculture
Target: Doubling farmers’ income by 2022-23 compared to 2017 .
Role of Agri in Indian Economy- Half the population & 17.4% GDP;
Industrial devlt as a raw material; Role in food security; International
trade – net earner.
 Ministry of Agriculture and Farmers Welfare is made up 2
departments: Department of Agriculture, Cooperation and Farmers
Welfare + Dept of Agri Research & Education
 Ministry for Fisheries, Animal Husbandry and Dairying This ministry
was newly setup in 2019, with two departments
1. Dept of Fisheries 2. Dept of Animal Husbandry And Dairying

Agricultural Inputs- Land
1. Land- 17% population, 2.5% land, 4% of water resources
Land reforms in India after independence –
(1) Zamindari Abolition, Vinoba’s Bhudaan movement
(2) Ceiling on Landholding i.e. fixing maximum size of land holding that an
individual can own.
(3) Laws to protection of tenant farmers
(4) National Land Records Modernization Programme NLRMP-2008: by
Department of Land Resources Because digital land records help reducing
court case related to sale / inheritance & help keeping track of land
ceilings.
(5) Forest Rights Act,2006 which gives ‘Patta’ (farm land ownership title) to
the forest dwellers, if the given family was cultivating that forest land for
the last 75 years.

Agricultural Inputs- Seeds
-Agriculture yield (amount of crop produced in a given acre of land)
depends greatly on seed quality.
-Government has approved 100% automatic FDI in seed development.
-Seed village concept: Group of farmers in a village given training to
produce seeds of various crops so they can fulfill seed demand of their
own & neighbouring villages.
-Seed bank / Seed vault is a depository that stores seeds to 1) preserve
genetic diversity 2) supply seeds during natural calamities and
unforeseen conditions.
- Agro Ministry gives funding for above two initiatives.

• Genetically modified (GM) crops-
➢ Hybrid seeds are developed by cross-breeding / cross-pollination with other plants.
➢ Whereas, Transgenic / Genetically modified seeds are developed by transferring selected
genes from one organism into another. E.g. Bacterium Bacillus thuringiensis genes inserted
in cotton → Bt. cotton → if bollworm pests eat it, it’ll die by the toxin crystals in Bt.cotton
plant.
➢ GM-Regulation? Environment Protection Act 1986 → (GEAC-Genetic Engineering
Appraisal Committee conducts studies, and recommends approving a GM crop in India.
• GM crops → Challenges?
- 1. Biosafety concerns - GM food crops may be unsafe for human and animal consumption.
They may harm the soil bacteria & bees → harm to entire food web and biodiversity. GM
crop may eliminate the wild/indigenous species by cross-pollination
- 2. American company Monsanto’s Bollgard technology is used for developing Bt Cotton
seeds. So, Indian Bt-cotton seed production companies have to pay a type of royalty to
Monsanto.
- 3.Monsanto also owns patent over these seeds for using them only once. _ i.e. when
such seeds are planted, they’ll produce crops only once. Farmer forced to buy new seeds
from company for every season.

Agri Inputs- Irrigation
-While India accounts for more than 17% of world population but we
have barely 4% of world's water resources. - India is a water stressed
country. >50% of the agriculture depends on rainfall.
- Irrigation water productivity is defined as ratio of the crop output to
the irrigation water applied.
e.g. To produce 1 kg of rice, Indian farmers use 3,000-5,000 litres of
water, whereas Chinese farmers manage it within 350 litres of water. -
MSP, heavily subsidized electricity, water and fertilizers = 60% of water is
consumed by water intensive crops like paddy and sugarcane. - By 2050,
India will be in the global hot spot for ‘water insecurity’. - To earn 2x
(double) income, a farmer must cultivate multiple crops annually. But
majority of farmers face water shortage so they can’t do so.

Irrigation
Pradhan Mantri Krishi Sinchai Yojana(2015) –
Aim? To improve the irrigation coverage, reduce wastage of water, using 4-pillar strategy:
1. Accelerated Irrigation Benefit Programme (AIBP) → Requires Ministry of Water
Resources to finish the ongoing national irrigation projects at a faster pace.
2. Watershed Development → Setup water harvesting structures like check dams, Nala
bund, farm ponds, tanks etc. Encourage traditional water storage systems such as Jal Mandir
(Gujarat); Khatri & Kuhl (H.P.); Zabo (Nagaland); Eri & Ooranis (T.N.); Dongs (Assam); Katas &
Bandhas (Odisha & M.P.).
3. Har Khet ko Pani → To distribute water to each and every farm.
4. Per Drop More Crops → Improve the water usage efficiency through Microirrigation
devices such as drips, sprinklers, pivots, rain-guns.
Related terms → a. Fertigation: Mixing water-soluble fertilizers in drip system → fertilizer
delivered into the root system → reduced wastage of fertilizers.
b. Mulching: It is a simple process of covering the bare soil with straw, wood chips, shredded
bark etc. to reduce the water evaporation, soil erosion and weed growth.

AGRI-INPUT → FERTILIZERS
Manure / Compost is a natural substance from decomposition of organic
waste. Whereas, Fertilizer is an artificial chemical prepared in factories
to boost nutrients in the soil.
- Soil Health Card(2015): contains the status of soils with respect to 12
parameters .A farmer’s land is tested & he is given updated soil card
once in every 3 years. - The card also advises on which type of crops,
seeds, fertilizer, irrigation method will be suitable for his farm,
according to his soil type.
- Neem Coating of Urea

Agricultural Inputs- Pesticides & Weedicides
• Integrated Pest Management i.e. rather than eradicating pest population to 100%, just try to keep
crop damage to economically tolerable level. Because even pests are important for biodiversity
protection and food chain balance. - Spread awareness about proper use of chemical pesticides (esp.
Endosulfan) so it doesn’t contaminate in food / land / water / human bodies excessively
• Organic farming is a type of agriculture that avoids the use of synthetic fertilizers, pesticides, and
other chemical inputs. It relies on crop rotation, crop residues, manures, biofertilizers, biopesticides
etc.
-Ecological benefits? Less use of chemicals → biodiversity protected, less soil pollution and water
pollution.
- Economic benefits? 1) organic products command higher prices among the health conscious buyers
from developed countries → more exports → less CAD, more farmer’s income. 2) less use of chemical
fertilizers → governments urea subsidy bill will decline → fiscal deficit can be controlled.
-Organic farming → Limitations? 1. Organic farming yield (quantity produced per acre) is lower than
conventional chemical-based farming. Difficult to produce off-season crops using organic farming. so if
entire India became “100% organic farming” → food shortage → inflation. 2. Shelf life, colour and
texture of organically grown fruits/vegetables are less attractive than chemically grown hybrid / GM
varieties. So, unless ordinary consumers are made aware of their health benefits they may not buy.

PKVY (2015) –Paramparagat Krishi Vikas Yojana
- Agro Ministry. = Not 100% paid by Union. (60:40,90:10)
- Mechanism? Form a group of 50 farmers in a cluster to start organic
farming. Every beneficiary farmer is given ₹ 20,000 per acre for 3 years
for doing organic farming.
-Zero Budget Natural Farming (ZBNF) - 'Zero Budget' means without
using any loan, and without spending any money on purchase of inputs
(seeds, fertilizers).
- 'Natural farming' means farming without chemicals. By using
biofertilizers, earthworms, cow dung etc. - ZBNF saves farmers from
debt-traps; and protects the environment, soil and biodiversity.
- Practice first started in Karnataka. Himachal Pradesh and Andhra
Pradesh are also frontrunners.

AGRI INPUTS → FINANCE / CREDIT
:-Notable steps to enhance credit availability to farmers →
Agricultural Finance-
Credit needs as Short term (<15 mnths), Medium Term (15- 5 yrs) & Long term (>5
yrs).
Sources- Non institutional as moneylenders,traders,relatives & Institutional sources
as cooperative banks, RRB s & Commercial banks- supervised by NABARD ( apex
inst to promote, develop & supervise agri & rural credit delivery mech)
-RBI’s PSL norms: 10% to agriculture + 8% to Marginal Farmer (upto 1ht) & Small
farmer (>1 upto 2ht).
-Nationalisation of banks after the Independence.
- Kisan credit card scheme & interest subvention scheme.
-Loan waivers for the farmers

INDIAN AGRICULTURE
 Green Revolution- > 250 % increase in wheat & rice production.
- Dr Norman Borlaug- ‘Naurin’- Mexican dwarf variety.
- (Green Revolution in India began in 1963 through the introduction of a high-yielding wheat crop variety
by American agronomist Dr Norman Borlaug. However, the term Green Revolution applies to the period
from 1966-1967—when it was widely adopted by the Indian farmer—to 1978, when it resulted in record
grain output of 131 million tones, ranking India as one of world’s biggest agricultural producers and a
member of an elite club of nations exporting food grains. It was a quantum leap from the bleak and
humiliating years of our dependence on PL 480 wheat sent by America.)
- Components- HYV seeds ( dwarf variety); Irrigation; Chemical Fertilizers; Chemical Pesticides &
Herbicides; Agri credit, storage & mktg/ distrbn.
• Impact- Positive(India's food-grain production had increased from 82 million tones (MT) in 1960-61 to
264 MT by 2013-14. In this period, the rice production increased from 34 MT to 100 MT.Simultaneously,
the wheat production also increased from 11 MT to over 90 MT. Besides, the average productivity of rice
at national level was increased from 1013 kg per hectare to above 2500 kg per hectare.Similarly, the
productivity of wheat also has gone up from 850 kg per hectare to over 3000 kg per hectare in the
corresponding period. Thereafter, Indian agriculture witnessed an all round development as a result of
which horticulture production is now over 280 MT, milk production about 140 MT, fisheries 9.5 MT and
eggs are about 73 billion. These achievements have placed India among the leading producer of these
food items)
- Negative1. Foodgrain( wheat, jowar, bajra, maize,rice) vs Non foodgrain disparity
- 2. Socioeconomic Impact- Interregional disparity wheat & rice; Interpersonal disparity(change in wages
area wise)
- 3. Ecological impact- Soil fertility degradation,water table, environmental degradation.

Farm loan waivers: arguments in favour – AGRARIAN DISTRESS(While corporate
borrowers are eligible for loan restructuring, farmers are not given such benefits.)
- Farm loan waivers: arguments against-
I) Lack of incentive to be "disciplined", when risky behavior is insured by someone. If
the government continue to give loan waivers, farmers will have no discipline to be
efficient, cost-savvy and hard working.
2. Loan waivers undermine honest credit culture– Urjit Patel. NPA problem will get
aggravated.
3. Loan waivers → Higher fiscal deficit → households and business firms will be hurt.
4. Total farm loans: ~5.5 lakh cr (2013). Out of that ~60% by formal lenders (banks,
Microfinance etc.) Rest by informal money lenders (Village Baniya, Shroff etc.) So even
if loan waivers are announced, all farmers will not benefit from it.
5. Govt’s expenditure on healthcare is ~1.2% of GDP. WHO recommends 5%. If all the
farm loans are waived it will cost 1.5% of GDP. So, if government has so much spare
money to spend, it’ll be better to spend in public healthcare which will benefit both
farming and non-farming families.
6. Loan waiver will not stop farmer suicide Farmer suicide is a result of: 1. Lack of
marketable surplus produce because they’ve small landholding, lack of irrigation, high
yielding seeds and fertilizers. 2. Lack of remunerative prices because of challenges in
APMC, MSP and transport-storage infrastructure. 3. Lack of financial inclusion and
financial planning. Even after good monsoon and good harvest, they waste money on
social events and pilgrimage. So, loan waiver is a short-term remedy that can’t
prevent farmer suicide until above three issues are addressed.

INDIAN AGRICULTURE
 Rainbow revolution- The various colors of the Rainbow Revolution indicate various farm practices such as
Green Revolution (Foodgrains), White Revolution (Milk), Yellow Revolution (Oil seeds),
Blue Revolution (Fisheries); Golden Revolution (Fruits); Silver Revolution (Eggs),
Red Revolution (Tomato), Pink Revolution (Meat), Grey Revolution (Fertilizers) and so on. Thus, the concept of Rainbow revolution is an integrated
development of crop cultivation, horticulture, forestry, fishery, poultry, animal husbandry and food processing industry.
 Second Green Revolution- BGREI (Bringing Green Revolution in Eastern India); Focus on organic farming
 List of Revolutions in the field of Agriculture in India-
• Black Revolution – Petroleum Production
• Blue Revolution – Fish Production
• Brown Revolution – Leather/non-conventional(India)/Cocoa production
• Golden Fibre Revolution – Jute Production
• Golden Revolution – Fruits/Overall Horticulture development/Honey Production
• Green Revolution – Food grains
• Grey Revolution – Fertilizer
• Pink Revolution – Onion production/Pharmaceutical(India)/Prawn production
• Red Revolution – Meat and Tomato Production
• Round Revolution – Potato
• Silver Fiber Revolution – Cotton
• Silver Revolution – Egg/Poultry Production
• White Revolution (In India: Operation Flood) – Milk/Dairy production
• Yellow Revolution – Oil Seeds production
• Evergreen Revolution – Overall development of Agriculture

INDIAN AGRICULTURE
Agri Price policy & Food security-
Useful for both producers as well as consumers against price fluctuations
- Based on LK Jha committe recommendations,
CAP(कृ षी मूल्य आयोग) in 1965- CACP (कृ षी मल्य व ककमती आयोग) in 1985 for
recommending MSP, Procurement price & Issue price(FCI selling price).
- MSP(ककमाि आधारभूत ककमत)- min at which Govt buys from farmers
- Procurement Price (वसली/अधधप्राप्ती ककमत)- for storage by FCI
- Issue Price (ववक्री ककमत)- FCI selling to FPS i.e. Procurement Price= Issue price+
Subsidy
- Problems with MSP- Wheat & Rice price increase yr by yr creating distorted prodn
pattern; From Surplus state procurement of wheat & rice creating regional
disparities & bias;huge stocks with FCI; uncontrolled inflation;uncompetitive
agriculture vis a vis mkt competition.
Distribution- FCI- procurement,storage,disrtibution of wheat,maize & coarse
foodgrains while NAFED related to oilseeds and pulses.
- Operational stock for TPDS & welfare schemes;buffer stock for exigencies.

MSP
- MSP:Price at which government purchases crops from the farmers.
• Guarantees a minimum and fair amount for the farmers’ produce prior to the sowing
season.
• Its objectives are to give sufficient remuneration to the farmers; to provide food grains
supply to buffer stocks; and to support the food security programme through PDS and other
programmes
 23 crops; FRP for Sugarcane & Jute;
 CCEA on recommendations of CACP(1965); A2,A2 +FL, C2
• Cost A2 - These are the costs the farmer actually pays out of his/her pocket for
buying various inputs ranging from seeds to fertilisers to pesticides to hired labour
to hired machinery or even leased-in land.
• Cost A2 +FL - In agriculture, farmers also use a lot of family labour and if their cost
is imputed and added to cost A2, that concept is called cost A2+FL.
• Cost C2 - the Comprehensive cost (cost C2), it includes imputed costs of family
labour, imputed rent of owned land and imputed interest on owned capital.
• National commission on farmers head by M.S Swaminathan recommended a 50
per cent margin over C2, which is also being the demand of the farmers.

INDIAN AGRICULTURE
PDS & TPDS
- Failure : Ltd to wheat & rice only; All states equal formula;More in urban
than rural; faulty inclusion & exclusion cards & ghost cards; leakages &
corruption.
 Agricultural marketing- Traditional way of agri mktg(subsistence
farming;barter system & sell at local mkt), Need of unified
marketing(NAM), APMC act 1963
• - Cooperative Farming- Cooperative farming refers to an organisation in
which:
-each member-farmer remains the owner of his land individually.But farming
is done jointly.
-Profit is distributed among the member-farmers in the ratio of land
owned by them.Wages distributed among the member-farmers according
to number of days they worked.
- Contract Farming & Gujrat Farmers controversy

NATIONAL FOOD SECURITY ACT, 2013
• Aim- To provide food & nutritional security in human life cycle approach,
by ensuring access to adequate qty of quality food at affordable prices to
people to live a life with dignity.
 ‘Welfare based approach’ to ‘ Rights based approach’.
 Jurisdiction- All states & UTs in India; Covering 2/3 rd of popln of India i.e.
Upto 75% poln in rural & 50% poln in India.
 3/2/1 Rs per kg- 5 kg per person of rice/wheat/coarse foodgrains from
priority households and 35 kg per household of AAY scheme
plus free meal to pregnant & lactating mothers 6 mnths post-child birth
and 6000/- maternity benefits
plus free meal/mid-day meals to children betn age gr 6 mnths-14 yrs
 Failure to provide this by State Govt- Food security allce.

• Reforms in TPDS scheme-
 Door step delivery of food grains to TPDS outlets.
 Appl of ICT tools incl icl end to end computerisation to ensure
transparency & prevent diversion.
 Use of AADHAR.
 FPS selection- public inst ,SHG, Cooperative inst,etc
 Diversification of commodities through TPDS.
 Innovative schemes like food coupons, cash tfr,DBT,etc.
• Grievance Redressal Mech- Dist Grievance Redressal Offr; State Food
Commission.
• Obligations of Central Govt- Regular supply of foodgrains to eligible
households by proper allocation of foodgrains to state govt through central
pool.

• Obligations of State- Implementation & Monitoring of scheme; local
storage; food security allce.
• Obligations of LSG/PRI- Implementation as per notification.
• Provisions for advancing Food security- Revitalisation of agriculture;
procurement, storage & movement related interventions & others like
adolescent girls health , nutrition, drinking water, sanitation,etc.

PRADHAN MANTRI FASAL BIMA YOJANA(2016)
• Agriculture itself depends on monsoon, pests, disease and other vagaries of nature. But
insurance penetration & insurance density is low in India.
- 2002: Agriculture Insurance Company of India Ltd. (AIC) was setup.
• - Agro Ministry launched Pradhan Mantri fasal Bima Yojana (Core scheme) and other crop
insurance schemes. Launched in Jan 2016, replacing existing NAIS & Modified NAIS.
 Commence functioning from Kharif season of 2016.
 Features- Uniform premium rate of 2%, 1.5% & 5% of sum assured for Kharif, Rabi &
horticulture, commercial crops respectively
 The premium rates to be paid by farmers are very low and balance premium will be paid
by Govt to provide full insured amount to the farmers against crop loss on account of
natural calamities.There is no upper limit on Government subsidy. Even if balance
premium is 90%, it will be borne by the Government.
 Earlier, there was a provision of capping the premium rate which resulted in low claims
being paid to farmers. This capping was done to limit Government outgo on the premium
subsidy. This capping has now been removed and farmers will get claim against full sum
insured without any reduction

PRADHAN MANTRI FASAL BIMA YOJANA
 This Scheme also covers Loss / damage resulting from occurrence of identified
localized risks i.e. hailstorm, landslide.
 Coverage is available up to a maximum period of 14 days from harvesting for
those crops which are kept in “cut & spread” condition to dry in the field after
harvesting, against specific perils of cyclone / cyclonic rains, unseasonal rains
throughout the country.
 Use of technology will be encouraged to a great extent. Smart phones will be used
to capture and upload data of crop cutting to reduce the delays in claim payment to
farmers.
 Government liability on premium subsidy would be shared by the Central and
State governments on a 50:50 basis.
 Private insurance companies, along with the Agriculture Insurance Company of
India Ltd, will implement the scheme
 Applicable for 3 yrs.

PRADHAN MANTRI FASAL BIMA
YOJANA
 Differences between old & new scheme-
 11 states vs All states & UTs; High premium rates vs less premium
rates; slow claim procedure vs fast claim; no post- harvest losses vs
post-harvest losses upto 14 days; no use of tech vs use of tech.
 Challenges? State Governments not paying their share of money in
PM Fasal Bima Yojana , private insurance companies rejected /
delaying claim settlements. Therefore, Union enacted new norms:
State Government / Insurance Company will have to pay additional
12% amount to farmer as interest / penalty for delays caused by them

Agriculture

-Rythu Bandhu scheme (Telangana)- 8000 per annum
- Krushak Assistance for Livelihood and Income Augmentation(Odisha)- 12500

International Financial Institutions
• Bretton Wood Twins
• IMF, WB
• BRICS NDB bank, AIIB
• WTO & all relevant aspects
• TRIPS & patent
• Economic integration & bilateral trade agreements

MCQs
1. Find correct statement(s) about AIIB: (2020)
1.AIIB has more than 80 member nations.
2. India is the largest shareholder in AIIB.
3. AIIB does not have any members from outside Asia.
Codes: (a) 1 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2 and 3 only
1. Which one of the following countries is not a founding member of
the New Development Bank? (CDS2019)
(a) Brazil (b) Canada (c) Russia (d) India
3. Find correct statement(s):
1. New Development Bank has been set up by APEC.
2. The headquarters of New Development Bank is in Shanghai.
(a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2

MCQs
4. Global Financial Stability Report' is prepared by :(2016)
a) European Central Bank
b) International Monetary Fund
c) International Bank for Reconstruction and Development
d) Organization for Economic Cooperation and Development
5. Which of the following organizations brings out the publication known
as 'World Economic Outlook’? (2014)
(a) The International Monetary Fund (b) UN Development Programme
(c) The World Economic Forum (d) The World Bank

6. With reference to Trade-Related Investment Measures (TRIMS), which of the following
statements is/are correct?
1. Quantitative restrictions on imports by foreign investors are prohibited.
2. They apply to investment measures related to trade in both goods and services.
3. They are not concerned with the regulation of foreign investment.
Ans Codes: [a) 1 and 2 only [b) 2 only [c) 1 and 3 only [d) 1, 2 and 3
7. In the context of which of the following do you sometimes find the terms 'amber box, blue
box and green box' in the news? (2016)
(a) WTO affairs (b) SAARC affairs (c) UNFCCC (d) India-EU negotiations
8. The terms 'Agreement on Agriculture', 'SPS Agreement and 'Peace Clause' are in the
context of affairs of the _ _ _
a)Food and Agriculture Organization (b) UN Framework Conference on Climate Change
(c) World Trade Organization (d) United Nations Environment Programme
9. TRIPS Agreement pertains to
(a) international tariff regime (b) intellectual property protection
(c) international practices on trade facilitation (d) international taxation of property

10. Which of the following are the main functions of WTO? (2020)
1. To organize meetings of members to arrive at trade agreements covering
international trade.
2. To ensure that member countries conduct trade practices as per
agreements agreed upon & signed by the members.
3. To provide a platform to negotiate and settle disputes related to
international trade between & among members.
codes: (a)1 and 2 only (b) 1 and 3 only (c) 2 and 3 only (d) 1, 2 and 3
11. Most Favoured Nation (MFN) Clause under WTO regime is based on the
principle of [CDS-2017]
a) non-discrimination between nations
b) discrimination between nations
c) differential treatment between locals & foreigners
d) uniform tariff across commodities

IMF
• Background- 1930’s Depression
• Bretton Woods Twins-The representatives of the USA, the UK and 42 other (total 44 countries) nations
met at Bretton Woods, New Hampshire, USA in July 1944 to decide a new international monetary
system (IMS). The International Monetary Fund (IMF) and the World Bank (with its first group-
institution IBRD) were set up together—popularly called as the Bretton Woods’ twins—both having
their headquarters in Washington, DC, USA.
• The International Monetary Fund (IMF) came up in 1944 whose Articles of Agreement were signed by
29 countries on the December 27, 1945 with the main functions as exchange rate regulation,
purchasing short-term foreign currency liabilities of the member nations from around the world,
allotting special drawing rights (SDRs) to the member nations and the most important one as the
bailor to the member economies in situation of any BoP crisis ( by giving short term loans)
• France is First country to get loans from IMF. Presently, total no of members in IMF- 189.
• The Board of Governors of the IMF consists of one Governor and one Alternate Governor from each
member country. For India, Finance Minister is the Ex-officio Governor while the RBI Governor is the
Alternate Governor on the Board. The day-to-day management of the IMF is carried out by the
Managing Director who is Chairman(currently, Ms Kristalina Georgieva) of the Board of Executive
Directors.
• Quota- Quota means member country’s share of capital investment in IMF, based on which voting
rights are decided.
• Reports: World Economic Outlook; Global Financial Stability Report; Fiscal Monitor
- Reserve Tranche( 25%); Extended Fund Facility ( 440%)

World Bank
• The World Bank (WB) Group today consists of five closely associated institutions propitiating in the role of development in the member
nations in different areas.
1. IBRD(1945)
International Bank for Reconstruction and Development is the oldest of the World Bank institutions which started functioning (1945) in the
area of reconstruction of the war-ravaged regions (WW II) and later for the development of the middle-income and creditworthy poorer
economies of the world.
2. IDA(1960)
• The International Development Agency (IDA) which is also known as the soft window of the WB was set up in 1960 with the basic aim of
developing infrastructural support among the member nations, long-term lending for the development of economic services especially in
poor countries.
3. IFC(1956)
• The International Finance Corporation (IFC) was set up in 1956 which is also known as the private arm of the World Bank. It lends money to
the private sector companies of its member nations.
4. MIGA(1988)
Multilateral Investment Guarantee Agency (MIGA), encourages foreign investment in developing economies by offering insurance
(guarantees) to foreign private investors against loss caused by non-commercial (i.e. political) risks, like currency transfer, expropriation,
war &civil disturbance.
5. ICSID(1966)
• The International Centre for Settlement of Investment Disputes (ICSID), set up in 1966 is an investment dispute settlement body whose
decisions are binding on the parties.
• India is not its member (that is why the Enron issue was out of its preview). India is largest loanee from IDA & IBRD for devlt & infra devlt.
- Reports: World Development Report; Global Economic Prospects

IMF Vs World Bank Difference in functions
Function of IMF and World Bank in the context of the world economy.
International monetary Fund
IMF gives short-term loans to its members, and helps in recovering from BoP crisis (balance of
payment crisis).
→Then IMF gives loans, they’ll ask you to change your policies accordingly. eg. they’ll ask you
to
1. let the MNCs enter your market,
2. reduce the jobs or shut down the loss making Public sector units etc.
3. stop giving subsidies to particular section (petrol/fertilizer etc.)
and so on…
IMF gives loans, it expects you to pay full amount back + interest rate.
In IMF there is a thing called Quota i.e.
Every member has to give some money to IMF, (IMF will give it to loan as other members). The
rich nations with bigger Quota has more voting rights (USA).So rich nations can effectively decide how IMF should function.
World Bank
In short, They give soft loans to poor nations for Development purpose and various health education,poverty removal
programs,etc
Soft loan= minimal interest rates, the EMIs have longer time brackets in between, and they don’t expect your to pay back the
principle. They facilitate private players to setup business in poor nations. (via insurance and loans)
- WB ( David Malpass) &
IMF - Kristalina Georgieva (Bulgarian economist, previously CEO of the World Bank)
becomes the second woman IMF Chief after Christine Lagarde, for five years tenure

Non BrettonWood Multilateral Development Banks

WTO & AGRICULTURE
• Bali Summit 2013-
 Least Developed Countries- DFQF (Duty Free Quota Free market access)
 Peace clause (upto 2017, later on permanent without time limit)
 Trade facilitation
• The Bali Package(2013) had 10 agreements, which can be clubbed under three heads :
TFA, Agriculture (Food Security) and Least Developed Nations (LDC). While developed nations’ primary attention
was on TFA, India’s concern was regarding moving ahead without finding a permanent solution to the food
security issue. India has been insisting that it would not agree to the TFA unless the entire Bali package, which
includes allowing developing countries to buy food from farmers for food security needs, is simultaneously
firmed up. No Permanent solution to the issue of public stockpiling for food security; but only a peace clause
under Bali agreement New Delhi has been seeking a permanent solution to the issue of public stockpiling for
food security because under the current rules, subsidies are capped at 10% of value of total production based on
1986-88 prices. India is close to breaching this on account of high inflation over the past few years. India wants
inflation to be taken into account when calculating subsidy limits. The country buys rice and wheat from farmers
at minimum support prices (MSP) to provide a reasonable income to producers. The stockpile is used to provide
heavily subsidised food to the poor.
• Peace Clause under Bali agreement-
Peace clause’ available to India under the Bali agreement that says no member can take action against another
on the food subsidy issue till a final agreement is reached on the issue, the deadline for which is the 11th
ministerial in 2017.

WTO & AGRICULTURE
• Nairobi Summit 2015-
 Abolish export subsidies
 Public stock holding for food security (on hold)
 Spl Safeguard mech (SSM) for developing countries (on hold)
 DDA- (no firm commitment)
Bargaining tool by India- Trade facilitation.

• TERMS- TRADE AGREEMENTS (RTA)
• PTA (Preferential Trade Area)- Reduced tariif rates amongst members
• Free Trade Agreement (FTA): A free trade agreement is a preferential arrangement in which members reduce tariffs
(zero)on trade among themselves, while maintaining their own tariff rates for trade with non-members.
• Customs Union (CU): A customs union (CU) is a free-trade agreement in which members apply a common external
tariff (CET) schedule to imports from non-members.
• Common Market (CM): A common market is a customs union where movement of factors of production is
relatively free amongst member countries
• Economic Union (EU): An economic union is a common market where member countries coordinate macro-economic
and exchange rate policies.
• Trade liberalization, give rise not only to beneficial trade creation but also to trade diversion. Trade diversion occurs when
tariff preferences offered under an FTA causes a shift of imports from firms in non- FTA member countries to less efficient
firms within the trade bloc, which now become competitive due to tariff reliefs.

PTA (min Import
duty)
FTA, CECA, CEPA
Multilateral /
Regional TA
Common
Market/Custom
Union (MERCOSUR)
Economic Union
(EU)
5 Stages / evolution

TATIP(Tran
s-atlantic
Trade &
Investment
Partnership
TPP(
Trans-
Pacific
Partnership
)
RCEP(Regional
Comprehensive & Economic
Partnership)33% of
world trade &
50% of popln
1+2 = Erode Indian grip over US-EU
markets
50% of world trade captured
Trans-Pacific Partnership (TPP), which has been signed but not yet ratified by member countries, and the Trans-
Atlantic Trade and Investment partnership (TTIP), which is currently being negotiated. India is not part of these
groupings and will hence be outside these large trade zones. Atlantic Trade and Investment partnership (TTIP)
TTIP, when concluded, will be a PTA between the United States and the European Community of 27 member
states and representing “30 percent of global merchandise trade, about 40 percent of world trade in services, and
nearly half of global GDP”. Trans-Pacific Partnership (TPP) The TPP comprises 12 member countries: Australia,
Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam. The
TPP will cover 40 percent of global GDP and 33 percent of world trade

MCQs
1. Which of the following statements is incorrect about infrastructure?
1.Infrastructure is an important contributor to economic development
2.All infrastructural facilities directly impact the production of goods and services
3.Infrastructure is required to provide support services
4.None of the above
• Answer: b
1. Which of the following statements is not a function of primary health
care?
1.Primary healthcare is involved in providing essential drugs
2.Primary healthcare is involved in spreading education and awareness related to health
problems
3.Primary healthcare focuses on conducting research

With reference to the “Hybrid Annuity Model (HAM)”, which of the
following statements is/are correct?
1. It is a mix of Build-Operate-Transfer (BOT) and Engineering,
Procurement and Construction (EPC) models.
2. Under HAM 40% of the project cost is born by the government.
Select the correct answer using the codes given below:
1 only

With reference to the “Hybrid Annuity Model (HAM)”, which of
the following statements is/are correct?
1. It is a mix of Build-Operate-Transfer (BOT) and Engineering,
Procurement and Construction (EPC) models.
2. Under HAM 40% of the project cost is born by the
government.

INFRASTRUCTURE
 ‘Overhead capital/social overhead capital’
 ‘Basic services without which primary/sec/tertiary economic activities can not function.’
• Why Infrastructure Development is necessary?
• Target of 5 trillion dollars economy.
• Infrastructure development will generate growth, employment and pull people out of poverty.
• Infrastructure development will benefit Government’s Ease of Doing Business.
• Developing Renewable Energy sector will help in mitigating climate change.
• Infrastructure investments can also help improve peace and security by enabling, sustaining and
enhancing societal living conditions.
 Required to fulfil SDG -9(Develop quality, reliable, sustainable and resilient infrastructure, including
regional and trans-border infrastructure, to support economic development and human well-being,
with a focus on affordable and equitable access for all)
 India has been able to spend only about US$100 billion annually on infrastructure as compared to 200
billion dollars requirement , leaving a deficit of around US$100 Billion per annum. National
Investment and Infrastructure Fund(NIIF) has been created with a capital of approximately Rs 40,000
Cr.

TYPES OF INFRASTRUCTURE
• Economic Infrastructure : This infrastructure is directly linked with the
economic development of a country or an organization. This includes the
basic amenities and services that directly influence and benefits the
production process economy distribution. Few examples of economic
infrastructure are power, transportation, irrigation, communication, etc.
• Social Infrastructure : This infrastructure is the basic services that improve
individual productivity and achieve social objectives. Social Infrastructure
contributes indirectly to the country’s economic development. For
instance, the education sector doesn’t contribute directly to the economic
development of a country. However, it helps indirectly by high-quality
education to the students and therefore producing doctors, scientists,
engineers, and technologist. Few examples of social infrastructure are
education,water supply, sanitation, health, housing, etc

INVESTMENT MODELS- PPP
 Introduction & Need of PPP-
- Introduced in India 2006; Concept borrowed from China;
- Need: Used for developing infrastructure projects;
Need of heavy investment & long gestation period for infrastructure
development;
It is an example of Leveraged investment as it takes advantages of
both- public & private sector ( appropriate allocation of resources,
responsibilities, risks & rewards )

SEZ
 SEZ is a defined geographical area clearly demarcated with boundary,
within the domestic economy, but insulated from domestic economy. (
DUTY EXEMPTED ENCLAVES)
- 1st EPZ in Kandla in 1965
 SEZ policy announced in 2000; SEZ act, 2005.
 Advantages- World class infrastructure for manufacturing goods & service
providers exclusively for exports; No import duties for export promotion ;
Pvt & foreign players can set up industries without any restrictions except
for negative list; Tax holiday for first 5 yrs; Flexible labour laws, Contractual
employment allowed; Single window clearance.
 Main objectives- Generation of additional economic activity; Promotion of
export of goods & services; Promotion of investment; Creation of
employment opportunities; Development of infra facilities.

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