Effect of Policies of Other Countries — Practice Questions
UPSC Prelims-pattern practice questions on foreign policies affecting India — GSP, Nitaqat, capital outflows, the Fragile Five and Chabahar — with explanations.
Questions
These are original UPSC-pattern practice questions. Attempt each one before revealing the answer.
With reference to the Generalised System of Preferences (GSP), consider the following statements:
- It is a scheme under which developed countries give non-reciprocal preferential tariffs to imports from developing countries.
- The United States withdrew India’s GSP beneficiary status in 2019.
- It is a WTO agreement that obliges all developed members to grant such preferences.
Which of the statements given above is/are correct?
Solution
Statements 1 and 2 are correct — GSP schemes are voluntary, non-reciprocal preferences; the US ended India’s benefits in June 2019. Statement 3 is wrong — GATT’s Enabling Clause permits such preferences but does not oblige anyone to grant them, which is why the US could withdraw them.
Answer: C
The term “Nitaqat”, which has implications for Indian workers abroad, refers to:
Solution
Nitaqat is Saudi Arabia’s workforce-localisation (Saudisation) programme, introduced in 2011. It sets quotas for Saudi nationals in private firms and so affects expatriate workers, including Indians. The other options describe different policies.
Answer: A
Which of the following can lead to portfolio capital outflows from India?
- A rise in interest rates by the US Federal Reserve
- A strengthening of the US dollar
- Global risk aversion during a financial crisis
Select the correct answer using the code given below.
Solution
All three push investors towards US and safe-haven assets. Higher US rates raise returns there; a stronger dollar makes rupee assets less attractive in dollar terms; risk aversion leads investors to sell emerging-market assets. All three were at work in 2013 and 2022.
Answer: D
The “Fragile Five” economies identified during the 2013 taper tantrum included India and which of the following?
- Brazil
- Turkey
- China
- South Africa
Select the correct answer using the code given below.
Solution
The Fragile Five were Brazil, India, Indonesia, South Africa and Turkey — economies with large current-account deficits that relied on foreign capital. China, with large surpluses and reserves, was not in the group.
Answer: B
With reference to Chabahar port, consider the following statements:
- It is located in Iran’s Sistan-Baluchestan province on the Gulf of Oman.
- The United States exempted its development from Iran-related sanctions in November 2018.
Which of the statements given above is/are correct?
Solution
Both are correct. Chabahar lies on the Gulf of Oman, outside the Strait of Hormuz. After re-imposing sanctions on Iran, the US exempted Chabahar’s development in November 2018, recognising its role in supplying Afghanistan.
Answer: C
Unilateral sanctions imposed by major powers often hurt third countries more than their targets. Examine with reference to India’s energy security and connectivity interests.
Solution
Introduction: Unilateral sanctions — imposed by one country or bloc without UN Security Council approval — work by threatening anyone who trades with the target. India, which recognises only UNSC sanctions as binding, has repeatedly borne their costs.
Body:
- Iran: after the US left the JCPOA (2018), India stopped importing Iranian crude (2019), losing a nearby, flexible supplier; Chabahar and the INSTC slowed despite the November 2018 exemption.
- Russia: sanctions and the G7 price cap (2022) complicated payments, shipping and insurance; India’s purchases of discounted crude drew Western criticism and later US tariff pressure.
- Defence: CAATSA (2017) threatened sanctions over the S-400.
- India’s responses: exemptions through diplomacy; rupee-based settlement; diversified crude sources; strategic reserves; insistence on strategic autonomy.
Conclusion: Sanctions expose the vulnerability of energy and connectivity plans built on single partners. Diversification, payment resilience and steady diplomacy are India’s best insurance.