UPSC IAS Archives

1. With reference to Trade-Related Investment Measures (TRIMS), which of

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.

Select the correct answer using the code given below :

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1 and 2 only

2 only

1 and 3 only

1, 2 and 3

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC IAS – 2020

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The official answer key for UPSC Prelims 2020 indicates that Statement 1 and Statement 2 are considered correct.

Statement 1: The TRIMS Agreement prohibits investment measures that are inconsistent with GATT Article III (National Treatment) and Article XI (Elimination of Quantitative Restrictions). Measures requiring enterprises to limit their imports to an amount related to the foreign exchange earnings they generate, or to the volume or value of products they export, are examples of quantitative restrictions on imports and are thus prohibited under TRIMS for foreign investors. So, statement 1 is correct.
Statement 2: According to the official key, this statement is considered correct. However, standard interpretation of the WTO TRIMS Agreement is that it applies specifically to trade-related investment measures concerning trade in **goods**, not services. Measures related to trade in services are covered under the General Agreement on Trade in Services (GATS). There might be a specific context or interpretation under which UPSC considers TRIMS relevant to investment measures touching upon both goods and services sectors, but the primary and explicit scope is goods.
Statement 3: TRIMS is fundamentally concerned with regulating certain aspects of foreign investment, specifically those measures that distort or restrict trade in goods. Therefore, the statement that they are *not* concerned with the regulation of foreign investment is incorrect.

The TRIMS Agreement requires WTO members to notify the Council for Trade in Goods of all investment measures that are incompatible with TRIMS and to eliminate them within a specified period (typically two years for developed countries, five for developing countries, and seven for least-developed countries). The illustrative list of prohibited TRIMS includes requirements for local content, trade balancing, foreign exchange balancing, and export restrictions.

2. In India, why are some nuclear reactors kept under “IAEA Safeguards” w

In India, why are some nuclear reactors kept under “IAEA Safeguards” while others are not ?

Some use uranium and others use thorium

Some use imported uranium and others use domestic supplies

Some are operated by foreign enterprises and others are operated by domestic enterprises

Some are State-owned and others are privately-owned

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Answer is Wrong!

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UPSC IAS – 2020

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The reason some nuclear reactors in India are under IAEA Safeguards while others are not stems from India’s nuclear policy and its separation plan agreed upon with the International Atomic Energy Agency (IAEA) and countries like the US.

– India maintains a distinction between its civilian and military nuclear facilities. Under the India-US civil nuclear agreement and India’s voluntary separation plan, civilian nuclear facilities are placed under IAEA safeguards. Military facilities are kept outside safeguards.
– Access to international nuclear trade, including the import of uranium fuel, is permitted only for the safeguarded civilian facilities. Consequently, reactors using imported uranium must be under IAEA safeguards. Reactors that are not under safeguards are designated for military purposes and therefore use only domestically produced nuclear material.
– Thus, the use of imported uranium is a direct consequence of a facility being designated as civilian and placed under safeguards, and facilities not under safeguards rely on domestic supplies. Option B captures this practical distinction: Some reactors (civilian, safeguarded) use imported uranium, while others (military, not safeguarded) use domestic supplies.

India is not a signatory to the Nuclear Non-Proliferation Treaty (NPT) as a nuclear weapon state. However, through its separation plan and additional protocols with the IAEA, it allows safeguards on its civilian nuclear program in exchange for access to international nuclear fuel and technology, enabling it to expand its nuclear power capacity.

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3. In the context of the Indian economy, non-financial debt includes whic

In the context of the Indian economy, non-financial debt includes which of the following ?

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1. Housing loans owed by households
2. Amounts outstanding on credit cards
3. Treasury bills

Select the correct answer using the code given below :

1 only

1 and 2 only

3 only

1, 2 and 3

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC IAS – 2020

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Non-financial debt refers to debt owed by sectors other than the financial sector. This includes debt of households, non-financial corporations, and the government.

– 1. Housing loans owed by households: Households are part of the non-financial sector. Housing loans are debt. Thus, this is non-financial debt. Correct.
– 2. Amounts outstanding on credit cards: Households are part of the non-financial sector. Credit card outstanding is debt. Thus, this is non-financial debt. Correct.
– 3. Treasury bills: Treasury bills are short-term debt instruments issued by the government. The government is part of the non-financial sector. Thus, government debt, including Treasury bills, is considered non-financial debt. Correct.

Total debt in an economy is often categorised into financial debt (debt within the financial sector) and non-financial debt (debt of households, corporations, and government). Non-financial debt is a key indicator of leverage in the real economy.

4. The term ‘West Texas Intermediate’, sometimes found in news, refers to

The term ‘West Texas Intermediate’, sometimes found in news, refers to a grade of

Crude oil

Bullion

Rare earth elements

Uranium

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UPSC IAS – 2020

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The term ‘West Texas Intermediate’ (WTI) is a well-known benchmark in the global commodities market.

– WTI refers to a grade of crude oil produced in Texas and Southern Oklahoma, USA. It is a major benchmark for oil pricing, particularly in North America. Other common benchmarks include Brent Crude (for European and global markets) and Dubai/Oman (for Middle Eastern/Asian markets).

Commodity benchmarks like WTI and Brent are important because they serve as reference prices for a vast volume of oil trades worldwide and influence energy prices globally.

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5. With reference to the international trade of India at present, which o

With reference to the international trade of India at present, which of the following statements is/are correct ?

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 :

1 and 2 only

2 and 4 only

3 only

1, 3 and 4 only

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC IAS – 2020

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The question asks about correct statements regarding India’s current international trade situation.

– 1. India’s merchandise exports are historically less than its merchandise imports, resulting in a merchandise trade deficit. This statement is generally correct based on persistent trends.
– 2. India’s imports of iron and steel, chemicals, fertilizers, and machinery are typically significant due to industrial and agricultural needs. While imports can fluctuate, a general decrease across all these major categories in recent years is unlikely given India’s economic growth and reliance on these items. This statement is likely incorrect.
– 3. India has a strong services sector, particularly IT and BPO, leading to a consistent surplus in services trade (exports of services are more than imports). This statement is correct.
– 4. Despite a surplus in services trade, India’s large merchandise trade deficit usually results in an overall current account deficit (CAD), meaning total imports of goods, services, income, and transfers exceed total exports and receipts. This statement is correct.

India’s balance of payments position is significantly influenced by its merchandise trade deficit, which is partially offset by its services trade surplus and remittances. However, the net effect often results in a current account deficit.

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6. With reference to Foreign Direct Investment in India, which one of the

With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic ?

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It is the investment through capital instruments essentially in a listed company.

It is a largely non-debt creating capital flow.

It is the investment which involves debt-servicing.

It is the investment made by foreign institutional investors in the Government securities.

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Answer is Wrong!

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UPSC IAS – 2020

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The question asks for a major characteristic of Foreign Direct Investment (FDI) in India.

– A) FDI can be made in both listed and unlisted companies, not essentially limited to listed ones. Incorrect.
– B) FDI primarily involves equity investment, meaning the foreign investor takes ownership stake in the domestic company. This inflow of capital is largely non-debt creating for the host country’s balance of payments, unlike external commercial borrowings or portfolio debt. This is a major characteristic. Correct.
– C) While the business receiving FDI might take on debt, the FDI inflow itself is equity, which leads to profit sharing or capital gains, not debt servicing in the traditional sense for the host economy’s external liabilities related to the FDI equity. Incorrect.
– D) Investment by foreign institutional investors (now Foreign Portfolio Investors – FPIs) in government securities is classified as Foreign Portfolio Investment (FPI), not FDI. FDI involves acquiring a lasting interest and control in an enterprise. Incorrect.

FDI is distinguished from FPI by the level of ownership and control acquired by the foreign investor. FDI typically involves a significant stake aimed at influencing management, while FPI is usually passive investment in securities.

7. With reference to the Indian economy, consider the following statement

With reference to the Indian economy, consider the following statements:

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‘Commercial Paper’ is a short-term unsecured promissory note.
‘Certificate of Deposit’ is a long-term instrument issued by the Reserve Bank of India to a corporation.
‘Call Money’ is a short-term finance used for interbank transactions.
‘Zero-Coupon Bonds’ are the interest bearing short-term bonds issued by the Scheduled Commercial Banks to corporations.

Which of the statements given above is/are correct ?

1 and 2 only

4 only

1 and 3 only

2, 3 and 4 only

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC IAS – 2020

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The question asks to identify the correct statements regarding different financial instruments in the Indian economy.

– Statement 1: ‘Commercial Paper’ is indeed a short-term (typically 7 days to one year) unsecured promissory note issued by highly-rated corporations to raise funds from the money market. This statement is correct.
– Statement 2: ‘Certificate of Deposit’ (CD) is a marketable receipt for funds deposited in a bank for a specified period (minimum 7 days). It is issued by commercial banks and financial institutions, not the Reserve Bank of India, and can be short to medium-term, not exclusively long-term. This statement is incorrect.
– Statement 3: ‘Call Money’ is a short-term finance (usually overnight) used in the interbank market for lending and borrowing funds to manage liquidity. This statement is correct.
– Statement 4: ‘Zero-Coupon Bonds’ do not pay periodic interest (coupon). They are sold at a discount to their face value, and the difference between the face value and the purchase price represents the investor’s return. They are not characterized as “interest bearing” in the traditional sense and can be issued by various entities (government, corporations, banks), not just Scheduled Commercial Banks to corporations. This statement is incorrect.

These instruments are key components of the money market (short-term) and capital market (long-term), facilitating funding and investment activities in the economy.

8. Consider the following statements: In the case of all cereals, pulse

Consider the following statements:

In the case of all cereals, pulses and oil-seeds, the procurement at Minimum Support Price (MSP) is unlimited in any State/UT of India.
In the case of cereals and pulses, the MSP is fixed in any State/UT at a level to which the market price will never rise.

Which of the statements given above is/are correct ?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC IAS – 2020

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The question asks about the correctness of two statements regarding the Minimum Support Price (MSP) regime in India.

– Statement 1: Procurement at MSP is not unlimited for all cereals, pulses, and oilseeds, or in all States/UTs. While MSP is declared for many crops, effective procurement at MSP is strong primarily for wheat and rice in certain states, mainly to meet the requirements of the Public Distribution System (PDS) and buffer stocks. Procurement for other crops is often limited or handled through different schemes like Price Support Scheme (PSS) or Price Deficiency Payment Scheme (PDPS), and is not guaranteed unlimited procurement from all farmers nationwide.
– Statement 2: MSP is fixed as a *minimum* price to protect farmers from excessive price falls. Market prices are determined by demand and supply forces and can rise significantly above the MSP, especially during periods of high demand or supply shortages. Fixing MSP at a level that the market price will *never* exceed is contrary to the purpose of MSP as a floor price.

The government’s procurement operations primarily focus on food grains like wheat and rice through agencies like the Food Corporation of India (FCI). For other crops, procurement operations are often limited in scale and geographical reach, and market prices frequently fluctuate above and below the MSP.

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9. Consider the following pairs: River Flows into 1. M

Consider the following pairs:

River	Flows into
1. Mekong	— Andaman Sea
2. Thames	— Irish Sea
3. Volga	— Caspian Sea
4. Zambezi	— Indian Ocean

Which of the pairs given above is/are correctly matched ?

1 and 2 only

3 only

3 and 4 only

1, 2 and 4 only

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC IAS – 2020

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The question asks to identify the correctly matched pairs of rivers and the water bodies they flow into.

– Pair 1: Mekong River flows through Southeast Asia and empties into the South China Sea, not the Andaman Sea. Incorrect match.
– Pair 2: River Thames flows through England and empties into the North Sea, not the Irish Sea. Incorrect match.
– Pair 3: Volga River is the longest river in Europe and flows through Russia, draining into the Caspian Sea. Correct match.
– Pair 4: Zambezi River flows through Southern Africa and empties into the Indian Ocean (specifically, the Mozambique Channel). Correct match.

Geographical knowledge of major rivers and their drainage basins is important for mapping and environmental studies. Knowing the final outflow point helps understand regional hydrology and connectivity.

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10. Consider the following statements: The weightage of food in Consumer

Consider the following statements:

The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI).
The WPI does not capture changes in the prices of services, which CPI does.
Reserve Bank of India has now adopted WPI as its key measure of inflation and to decide on changing the key policy rates.

Which of the statements given above is/are correct ?

1 and 2 only

2 only

3 only

1, 2 and 3

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC IAS – 2020

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The question asks which of the given statements regarding CPI, WPI, and RBI’s inflation measure are correct.

– Statement 1: The weightage of food in Consumer Price Index (CPI) is indeed significantly higher than its weight in the Wholesale Price Index (WPI) in India. CPI basket reflects typical household consumption patterns where food items constitute a large share of expenditure, while WPI tracks prices at the wholesale level which includes manufactured products, fuel, power, and primary articles (including food).
– Statement 2: WPI primarily measures price changes of goods traded in wholesale markets. CPI measures price changes of a basket of goods and services consumed by households. Therefore, WPI does not capture changes in the prices of services, while CPI does.
– Statement 3: The Reserve Bank of India (RBI) officially adopted the Consumer Price Index (Combined) (CPI-C) as its key measure for inflation targeting and monetary policy decisions following the recommendations of the Urjit Patel Committee in 2014. Prior to this, WPI was more commonly used, but now CPI is the primary target variable for inflation.

CPI reflects the impact of price changes on the final consumer, making it a more relevant measure for monitoring the welfare impact of inflation and for informing monetary policy aimed at price stability for consumers. WPI captures price movements at an earlier stage of the economic transaction.

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