Economic Sanctions as a Foreign Policy Tool
Indian Economy
- PYQs8
- Articles1
Background
Understanding the instruments of international relations, their economic impact on target countries and the global economy, and their effectiveness in achieving foreign policy goals. Relevant for India's trade and diplomatic strategies.
Economic sanctions are punitive measures imposed by one or more countries against another country, group, or individual to achieve specific foreign policy or national security objectives. These measures can include trade restrictions, asset freezes, travel bans, and financial prohibitions, aiming to compel a change in behavior without military intervention.
Facts & tables
- Sanction Termination
- U.S. undertakes to 'terminate all types of sanctions against' Iran.
- Asset Release
- 'Frozen or restricted funds and assets' of Iran to be made 'fully available'.
- Trade Waivers
- 'Oil and petrochem exports are waived, blockade lifted'.
- Purpose
- Used to exert economic and political pressure in international relations.
| Type | Reference |
|---|---|
| Conceptual area | International Economics |
| Conceptual area | International Relations |
| Body | Role |
|---|---|
| United States government | Imposes/lifts sanctions |
Prelims angle
Prelims angle: Multi-statement analysis
Prelims angle: Factual recall
- Non-military foreign policy tool.
- Includes trade restrictions, asset freezes, financial prohibitions.
- Aims to compel behavioral change.
- U.S. lifting sanctions on Iran as part of a deal.
- Impacts global trade and financial systems.
| Year | Framing tags |
|---|---|
| 2023 | Multi-statement analysis, Factual recall |
| 2020 | Conceptual understanding, Multi-statement analysis |
| 2020 | Multi-statement analysis, Factual recall |
| 2020 | Multi-statement analysis, Factual recall |
| 2017 | Factual recall, Terminology-based question |
| 2016 | Multi-statement analysis, Conceptual understanding |
| 2016 | Statement-based questions, Factual recall |
| 2016 | Factual recall, Institutional roles and functions |
Timeline
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International Economics
Conceptual area
-
International Relations
Conceptual area
-
Prelims 2016
Multi-statement analysis, Conceptual understanding
-
Prelims 2016
Statement-based questions, Factual recall
-
Prelims 2016
Factual recall, Institutional roles and functions
-
Prelims 2017
Factual recall, Terminology-based question
-
Prelims 2020
Conceptual understanding, Multi-statement analysis
-
Prelims 2020
Multi-statement analysis, Factual recall
-
Prelims 2020
Multi-statement analysis, Factual recall
-
Prelims 2023
Multi-statement analysis, Factual recall
-
Key points from the first round of Iran-U.S. talks
Punitive economic measures to achieve foreign policy goals; U.S. lifting sanctions on Iran; impacts trade & capital flows.
See also
No related topics linked yet.
Past papers
2016–2023 · 8 questions
In the news
Key points from the first round of Iran-U.S. talks
Punitive economic measures to achieve foreign policy goals; U.S. lifting sanctions on Iran; impacts trade & capital flows.
Try these PYQs
Consider the following statements:
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 trade between India and Bangladesh.
3. In the last five years, Nepal has been the largest trading partner of India in South Asia.
Which of the statements given above is/are correct?
Statement 1 is not correct. Bilateral trade between India and Sri Lanka has increased by around 9 times between 2000-01 and 2018-19. Total trade between the two countries was US$ 6.2 billion in 2018-19, out of which India's exports to Sri Lanka were US$ 4.7 billion and imports were US$ 1.5 billion. Although India has always had a trade surplus with Sri Lanka, the gap has widened since 2008-09. In 2012-13 and 2016-17, the trade slumped, thus disturbing the steady increase in the graph. Statement 2 is correct. According to the World Bank, India exports $2.25 billion worth of textile and clothing products to Bangladesh. In turn, it imports $336 million worth of textile and clothing products from Dhaka. Statement 3 is not correct. Bangladesh is India's biggest trade partner in South Asia. Bilateral trade between India and Bangladesh has grown steadily over the last decade. India's exports to Bangladesh in FY 2018-19 stood at $9.21 billion and imports during the same period were at $1.04 billion.
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?
1. Not depending on short-term foreign borrowings
2. Opening up to more foreign banks
3. Maintaining full capital account convertibility
Select the correct answer using the code given below:
Not depending on short-term foreign borrowings: This reduces exposure to capital flight. During a crisis, foreign investors may pull their money out of emerging markets like India, leading to rupee depreciation and financial instability. By limiting short-term foreign borrowings, India can lessen the impact of such capital flight. Opening up to more foreign banks: While this might seem beneficial, it can also increase reliance on foreign capital. During a crisis, foreign banks might be more likely to restrict credit, negatively impacting the Indian economy. Maintaining full capital account convertibility: This allows for the free movement of capital in and out of the country. While it can be beneficial in normal times, it can also exacerbate capital flight during a crisis. Therefore, the most prudent strategy is to reduce dependence on short-term foreign borrowings to minimize the vulnerability caused by potential capital flight. Hence, only statement 1 is correct. Hence, option A is the correct answer.
With reference to the International Monetary and Financial Committee (IMFC), consider the following statements:
1. IMFC discusses matters of concern affecting the global economy and advises the International Monetary Fund (IMF) on the direction of its work.
2. The World Bank participates as an observer in IMFC’s meetings.
Which of the statements given above is/are correct?
Statement 1 is Correct: The International Monetary and Financial Committee (IMFC) serves as a vital forum for discussing global economic issues and providing guidance to the International Monetary Fund (IMF). It brings together finance ministers, central bank governors, and other high-level officials from member countries to discuss challenges and opportunities facing the global economy. They also advise the IMF on its policy direction and work program. Statement 2 is Correct: The World Bank, while a separate institution, collaborates closely with the IMF. While not a formal member of the IMFC, the World Bank typically participates as an observer in IMFC meetings. This allows for better coordination and exchange of information between the two institutions on matters of mutual interest, such as global economic stability and development. Hence, option C is the correct answer.
Broad-based Trade and Investment Agreement (BTIA)’ is sometimes seen in the news in the context of negotiations held between India and
The Broad-based Trade and Investment Agreement (BTIA) is negotiated between India and the European Union (EU).
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, 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.
Select the correct answer using the code given below:
Statement 1 is correct. Merchandise trade deficit is the largest component of India's current account deficit. As per RBIs data, India's Merchandise exports during April-August 2019- 2020 were USD 133.14 billion, as compared to USD 210.39 billion of imports during the same period. Statement 2 is incorrect. Commodity-wise composition of imports between 2011-12 and 2018-19 shows that imports of iron and steel, organic chemicals, industrial machinery have registered positive growth rates as % of share in imports. Statement 3 is correct. India's net services (service exports - service imports) have been in surplus. India's Service exports during April-August 2019- 2020 were USD 67.24 billion, as compared to USD 39.25 billion of imports during the same period. Statement 4 is correct. Current Account Deficit (CAD) or trade deficit is the shortfall between exports and imports. As per Economic Survey 2019-20, India's CAD was 2.1% in 2018-19, and 1.5% of GDP in H1 of 2019-20. Therefore, the correct answer is (D) 1, 3 and 4 only. _NOTE: UPSC has not considered this question for marking._
Show 3 more PYQs
Consider the following statements :
Statement-I : India accounts for 3.2% of global export of goods.
Statement-II :Many local companies and some foreign companies operating in India have taken advantage of India's 'Production-linked Incentive' scheme.
Which one of the following is correct in respect of the above statements?
* Statement I is incorrect: India's share in global merchandise trade is only 1.8% and 4% in global services. India plans to increase its export share in global trade from 2.1% to 3% by 2027 and 10% by 2047. * Statement II is correct: The PLI scheme is open to both domestic and international manufacturers. Samsung as well as Indian firms such as Dixon Technologies, UTL, Neolyncs, Lava International, Optiemus Electronics and Micromax are also expanding their factories to take advantage of the PLI scheme.
‘Global Financial Stability Report’ is prepared by the -
The 'Global Financial Stability Report' is prepared by the International Monetary Fund (IMF). The Global Financial Stability Report is a semiannual report published by the IMF that assesses the stability of the global financial system and emerging market financing. It highlights potential risks and vulnerabilities in the financial system and provides policy recommendations to promote financial stability.
With reference to the ‘Trans-Pacific Partnership’, consider the following statements:
1. It is an agreement among all the Pacific Rim countries except China and Russia.
2. It is a strategic alliance for the purpose of maritime security only.
Which of the statements given above is/are correct?
Statement 1 is Incorrect: While China and Russia were not part of the TPP negotiations, it wasn't solely focused on Pacific Rim countries. Other economies like Vietnam and Singapore were part of the TPP despite not exactly being on the Pacific Rim. Statement 2 is Incorrect: The TPP was a proposed trade agreement, not a strategic alliance for maritime security. It aimed to reduce trade barriers and promote economic integration among member countries. The TPP negotiations were concluded in 2015, but the agreement was never ratified by all the signatories. The United States withdrew from the TPP in 2017, effectively ending the initiative in its original form. However, some member countries pursued alternative trade agreements based on the TPP framework. Hence, option D is the correct answer.