External Sector & International Institutions

US puts India back on IPR Priority Watch List

Context: The US has placed India on the ‘priority watch list’ of the US Trade Representative. The annual Special 301 Report states that India remains one of the world’s most challenging major economies with respect to protection and enforcement of intellectual property rights.

Relevance of the topic:

Prelims: Special 301 Report of United States Trade Representative.

Mains: Issues related to IPR Protection in India.

Special 301 Report of United States Trade Representative

Each year, the Office of the United States Trade Representative (USTR) conducts a review to identify countries that:
- deny adequate and effective protection of intellectual property (IP) rights.
- deny fair and equitable market access to the U.S.
Based on this review, USTR, identifies countries as Priority Foreign Countries or places them on the Priority Watch List.
- Priority Foreign Countries: Countries whose acts, policies, or practices have the greatest adverse impact (actual or potential) on relevant U.S. products.
- Priority Watch List indicates that problems exist in that country with respect to IP protection, enforcement, or market access for U.S. persons relying on IP.

Reasons for placing India on the Priority Watch List

High customs duties directed to IP-intensive products such as information and communications technology (ICT) products, solar energy equipment, medical devices, pharmaceuticals, and capital goods. This is viewed as denying fair and equitable market access to the US.
Delay in granting patents: Lengthy patent examination process in India can lead to long waiting periods to receive patent grants and have excessive reporting requirements. This discourages innovation and investment, particularly for technology-driven industries.
Weak enforcement of IPR: Despite having a Copyright Act, there is widespread piracy of copyrighted materials. Stakeholders have reported continuing problems with unauthorised file sharing of video games, signal theft by cable operators, commercial-scale photocopying and unauthorised reprints of academic books, and circumvention of technological protection measures etc.
Threat of patent revocations and the procedural and discretionary invocation of patentability criteria under the Indian Patents Act impact companies across different sectors.
Insufficient legal means to protect Trade Secrets in India.

Other Issues highlighted by the US

Compulsory Licensing:
- Provision under the Indian Patent Act, 1970, that allows the government to grant licenses to third parties to produce, use, or sell a patented invention without the consent of the patent holder. E.g., In 2012, India granted its first compulsory license to Natco Pharma to produce a generic version of a cancer drug, Sorafenib, which was patented by Bayer. The decision aimed to increase access and affordability to the cancer drug in the country.
- However, compulsory licensing is viewed by the US and other countries as against the interest of their companies.
Evergreening of Patents:
- Section 3(d) of the Patents Act, 1970 states that the mere discovery of a new form of a known substance that does not result in increased efficacy or the use of a known process with insignificant changes, may not be considered patentable. It aims to ensure that patents are granted only for genuinely innovative and significant inventions.
- However, determining whether a modification or improvement qualifies as a substantial enhancement of efficacy can be subjective and prone to legal disputes.

While steps to improve IP Office operations and procedures have shown some progress, India’s overall IP enforcement remains inadequate.

Also Read: Revamping India’s Intellectual Property Rights Ecosystem

UNCTAD

Context: The UNCTAD report has made growth projections about India that Indian economy is projected to grow 6.5% in 2024.

About UNCTAD:

The United Nations Conference on Trade and Development (UNCTAD) was established almost six decades ago in 1964, as an organ of the United Nations General Assembly.
UNCTAD helps developing countries participate more equitably in the global economy.
It also supports developing countries efforts to use trade, investment, finance, and technology as vehicles for inclusive and sustainable development.
Membership: 195 member states.
HQ: Geneva, Switzerland
As part of the United Nations Secretariat, UNCTAD reports to the UN General Assembly and the Economic and Social Council but has its own membership, leadership and budget. It is also part of the UN Sustainable Development Group and supports the implementation of the Financing for Development process.
UNCTAD works with member States, international organizations, academics, non-governmental organizations, media, civil society and youth.
The UN General Assembly held the first United Nations Conference on Trade and Development in 1964. The UN institutionalized the conference and gave it a mandate to meet every four years, with intergovernmental bodies meeting between sessions and a permanent secretariat providing the necessary substantive and logistics support.
There have been 15 quadrennial conferences since 1964. The fifteenth (UNCTAD15) was held in Bridgetown, Barbados in October 2021.

UNCTAD Reports

The United Nations Conference on Trade and Development (UNCTAD) publishes important reports like:

Trade and Development Report
World Development Report
The least Developed Countries Report
Information and Economy Report
Commodities and Development Report
Technology and Innovation Report

WTO’s Existential Crisis

Context: The 13th biennial ministerial meeting of the World Trade Organisation (WTO) ended without any significant accomplishments, as the member countries could not agree on how to solve several issues staring at the international community.

What is a World Trade Organisation (WTO)?

It is an international organisation established in 1995 through the Marrakesh Treaty to promote free and fair international trade.
It is successor to the General Agreement on Tariffs and Trade (GATT), a multilateral agreement which came into being in 1947 to promote trade in Goods.
Under GATT, 8 rounds of negotiations took place. The 8th Round of Negotiations are referred to as the Uruguay Round (1986-94), which ultimately led to the establishment of WTO in 1995.
The WTO is based at Geneva, Switzerland. Presently, it has 164 member countries.

Structure of WTO

Ministerial Conference:
- The Topmost decision-making body of WTO is the Ministerial Conference.
- Usually meets every two years.
- Brings together all members of the WTO, all of which are countries or customs unions.
- The Ministerial Conference can take decisions on all matters under any of multilateral trade agreements.
The General Council oversees the operation of the agreements and ministerial decisions on a regular basis. It also acts as a Dispute Settlement Body and a Trade Policy Review Body, each with its own chairman.
Director General (DG), appointed for a period of four years by the Ministerial Conference, heads the Secretariat of the WTO.

What are the Principles of International Trade Subscribed by the WTO?

Most Favoured Nation: Each of the WTO member countries should “treat all the other members equally as ‘most-favoured’ trading partners.”. "Grant someone a special favour (such as a lower customs duty rate) and you have to do the same for all other WTO members". However, some exceptions such as FTAs are allowed.
National Treatment: Imported and locally produced goods should be treated equally. The same should apply to foreign and domestic services, and to foreign and local trademarks, copyrights, and patents. National treatment only applies once a product, service or item of intellectual property has entered the market. Therefore, charging customs duty on an import is not a violation of national treatment even if locally produced products are not charged an equivalent tax.
Special and Differential Treatment: Give developing countries special rights such as longer time periods for implementing agreements and commitments, support to help developing countries to build the infrastructure to undertake WTO work etc.

What are the Issues that the WTO is Plagued With?

Stalemate in Negotiations: The WTO follows the process of consensus-based decision-making. However, it has frequently led to deadlocks in negotiations, thereby hindering the ability to reach meaningful agreements on crucial matters like agricultural subsidies, intellectual property rights, and market access.
Concerns of Developing Nations: Developing countries contend that negotiations are often dominated by developed nations, giving them an edge in shaping rules that favour their interests. These countries encounter difficulties in fully engaging in negotiations and struggle with the complexities of adhering to and implementing trade regulations and standards.
Self-Classification of Members: There are instances when relatively well-off members self-identify themselves as developing countries to take advantage of special treatment provisions. This has raised concerns about fairness and equity.
Dysfunctional Dispute Settlement Mechanism: The WTO's dispute settlement mechanism faces a crisis due to the United States' blocking of appointments to the Appellate Body. This situation presents challenges for members in enforcing WTO obligations without a functional appeals process.
Limited Capacity to Detect & Address Violations: There are concerns about the WTO's limited capacity to detect and address violations of its multilateral agreements in a prompt and efficient manner.
Rise in Protectionism and Bilateralism: Recently there has been a surge in protectionist policies and a shift toward bilateral or regional trade pacts, circumventing the broader multilateral framework of the WTO.
Emerging Challenges: Various new concerns have arisen since 1995, including the intersection of trade with issues like climate change, Sustainable Development Goals (SDGs), gender equality, and human rights. However, the WTO has lagged behind in incorporating these demands into its original framework.

How to Reform the WTO?

Breaking the Deadlock in Dispute Settlement System: Functioning of the Dispute Settlement System is crucial in ensuring the rules-based trading order. Efforts should be made to appoint the members of the Appellate Body at the earliest.
Enhancing Transparency to Boost Legitimacy: Enhanced transparency on both national and international levels is necessary to improve the quality and legitimacy of WTO regulations. This involves avoiding closed-door meetings or exclusive discussions (like mini-ministerials or green rooms) that exclude certain members from important decision-making processes.
Institutional Reforms:
- Establishing an Executive Committee: To enhance the WTO's decision-making processes, there’s an inherent need to establish an executive committee to address the lack of leadership within the WTO and offer guidance for future negotiations.
- Strengthening the Secretariat's Role: The WTO should bolster the Secretariat's role as a pivotal agenda setter within the organisation and improve its ability to conduct research and gather data.
Giving a Voice to Smaller Nations: As per the foundational principle of consensus, all members' viewpoints, including those of smaller nations, must be respected. This includes refraining from using political or economic pressure to coerce a country into agreeing to decisions that contradict its fundamental interests.
Enhanced Technical Assistance for Developing Nations: This includes providing improved technical assistance to developing nations and granting them access to independent advice, such as from UNCTAD, to enable their full participation in WTO activities.

Conclusion

Reforming the World Trade Organisation is of critical importance, without which the trade multilateralism will be beset with problems, thereby pushing the world to higher levels of uncertainty and volatility.

International Trade Using Vostro Accounts

Context: Russia has managed to use up most of its rupee balance (more than $8 billion) that had piled up in special vostro accounts of Indian banks.

What are Vostro Accounts?

Vostro accounts are accounts a bank holds on behalf of another foreign bank.
A Rupee Vostro account is used to facilitate international trade transactions in Indian rupee. Rupee Vostro accounts keep a foreign entity's holdings in the Indian bank, in Indian rupees.

How do Transactions Take Place?

When an Indian importer wants to make a payment to a foreign trader in rupees, the amount will be credited to this Vostro account, and when an Indian exporter needs to be paid for supplying goods or services, this Vostro account will be deducted, and the amount will be credited to the exporter's account.
Even though rupee invoicing for international transactions was allowed earlier, countries with whom we run trade deficits were reluctant to use this rupee settlement because the vostro accounts are left with surplus amounts.
To overcome this, the RBI released a notification allowing international trade settlement in India rupees. It allowed surplus rupee held in vostro accounts to invest in rupee assets like Government securities.

IMF Bailout - Bangladesh

Context: Bangladesh has sealed a bailout agreement with IMF to boost its cash strapped economy.

Reasons for seeking Bailout from IMF

Balance of Payment crisis: A nation may seek a bailout when it faces a deficit in its balance of payments, which includes trade imbalances, a shortage of foreign exchange reserves, and difficulties in meeting external debt obligations. It can be a result of political instability, populist measures such freebies etc.
Unsustainable Debt: When a country accumulates unsustainable levels of debt, it may become unable to service its debt obligations, potentially leading to default. E.g., Sri Lanka and Pakistan.
External shocks: Natural disasters, global economic crises, or other external shocks like pandemic (COVID-19) can severely affect a country's economic stability. E.g., Bangladesh following the Russia Ukraine war its dollar reserves have shrunk by more than 1/3^rd due to costly oil imports.
Currency depreciation due to inappropriate monetary & fiscal policies. E.g., overly expansionary monetary policies, such as printing excessive money or keeping interest rates too low for too long, can lead to high inflation and exchange rate instability.

IMF helps countries in following ways

It basically lends money, often in the form of special drawing rights (SDRs), to troubled economies that seek the lender’s assistance.
SDRs simply represent a basket of five currencies, namely the U.S. dollar, the euro, the Chinese yuan, the Japanese yen, and the British pound.
Currently, Bangladesh is in urgent need for U.S. dollars to import essential items such as fuel and also to pay their foreign debt.

Conditionalities of IMF Bailout

Reducing government borrowing – Higher taxes and lower spending
Higher interest rates to stabilise the currency.
Structural adjustment such Privatisation, deregulation of certain sectors.

Issue with IMF conditions

The policies of structural adjustment and macroeconomic intervention can make difficult economic situations worse.
For instance, in the Asian crisis of 1997, countries such as Indonesia, Malaysia and Thailand were required by the IMF to pursue tight monetary policy (higher interest rates) and tight fiscal policy to reduce the budget deficit and strengthen exchange rates. However, these policies caused a minor slowdown to turn into a serious recession with very high levels of unemployment.

Does the IMF charge for its loans?

All IMF members have access to financial support through the General Resources Account (GRA), which is subject to various charges. These charges are designed to cover the operational costs of the IMF and support its activities, including those related to providing policy advice and capacity development to member countries.

About IMF

The IMF is an independent international organization.
It is a cooperative of 190 member countries, whose objective is to promote world economic stability and growth.
It was originally created in 1945 as part of the Bretton Woods agreement, which attempted to encourage international financial cooperation by introducing a system of convertible currencies at fixed exchange rates.
The member countries are the shareholders of the cooperative, providing the capital of the IMF through quota.
It is one of several autonomous organizations designated by the United Nations (UN) as “Specialized Agencies,” with which the UN has established working relationships.
It is a permanent observer at the UN.
Its headquarters is in Washington DC.
The IMF began its operations in 1947, and France became the first country to draw funds from the IMF in 1947.
Membership of the IMF is compulsory to be part of the International Bank for Reconstruction and Development (IBRD or World Bank).

IMF’s lending provisions

Extended Fund Facility: It provides financial assistance to countries facing serious medium-term balance of payments problems because of structural weaknesses that require time to address.
Extended credit Facility: It provides medium-term financial assistance to low-income countries (LICs) with protracted balance of payments problems.
Rapid Financing Instrument: It provides prompt financial assistance to any IMF member country facing an urgent balance of payments need. It is one of the facilities under the General Resources Account (GRA) that provide financial support to countries, including in times of crisis.
Rapid Credit Facility: It provides fast concessional financial assistance to low-income countries (LICs) facing an urgent balance of payments need.
Flexible Credit Line: It is designed to meet the demand for crisis-prevention and crisis-mitigation lending for countries with very strong policy frameworks and track records in economic performance.
Resilience and Sustainability Facility: It provides affordable long-term financing to countries undertaking reforms to reduce risks to prospective balance of payments stability, including those related to climate change and pandemic preparedness.

U.S. pick Ajay Banga confirmed as next president of World Bank

Context: The World Bank confirmed Ajay Banga was selected as its next president on Wednesday, taking charge at a pivotal time for the development lender as it looks to better address climate change. The Bank’s board voted to approve his leadership for a five-year term. He will take over the role from David Malpas in June.

About world bank

World Bank came into existence in the year of 1944 along with IMF at the meeting of the UN Monetary and financial conference, commonly known as the Bretton woods conference.

Now it has 189 members

India is one of the foundational members of the world bank

World bank Organization

The World Bank is like a cooperative, made up of 189 member countries.
These member countries, or shareholders, are represented by a Board of Governors, who are the ultimate policymakers at the World Bank.
Generally, the governors are member countries' ministers of finance or ministers of development.
They meet once a year at the Annual Meetings of the Boards of Governors of the World Bank Group and the International Monetary Fund.

World Bank is not a single entity rather it is a group of five institutions

IBRD

Created in 1944 to help Europe rebuild after World War II.
IBRD joins with IDA, our fund for the poorest countries, to form the World Bank.
They work closely with all institutions of the World Bank Group and the public and private sectors in developing countries to reduce poverty and build shared prosperity
The International Bank for Reconstruction and Development (IBRD) is a global development cooperative owned by 189 member countries.
As the largest development bank in the world, it supports the World Bank Group’s mission by providing loans, guarantees, risk management products, and advisory services to middle-income and creditworthy low-income countries, as well as by coordinating responses to regional and global challenges.

IDA

The International Development Association (IDA) is part of the World Bank that helps the world’s poorest countries.
Established in 1960 and headquartered in Washington DC, IDA aims to reduce poverty by providing zero to low-interest loans (called “credits”) and grants for programs that boost economic growth, reduce inequalities, and improve people’s living conditions.

IFC

Established in the year 1956
Headquarters at Washington DC
It makes investments in productive private enterprises in association with private investors.
It concentrates on areas where sufficient private capital is not forthcoming on reasonable terms and conditions.
It acts as a clearing house for bringing together investment opportunities, private capital and experienced management.
It stimulates the international flow of capital.
It assists the development of capital markets in less-developed countries.
It encourages private sector activity in developing countries through three types of activities.

MIGA

MIGA is the World Bank Group’s most recent agency (1988), created in Washington DC with the aim of attracting private capital to unfavourable environments, usually countries with a lower level of income and in contexts that are unappealing for investments.

This agency works as a complement to the IFC, providing guarantees to foreign investors against so-called “political risks”, which are risks related to the country where the investment will be applied, such as:

Losses related to currency convertibility (difficulties in converting local currency into dollars or euros) and transfer restrictions of the same nature;
Countries in violent contexts (wars, etc.);
Contractual violations by local governments which place the investment at risk;
Seizure of private investors’ assets or properties and failure to meet financial obligations on the part of the Host State

ICSID

It was established in 1966 by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention).
The ICSID Convention is a multilateral treaty formulated by the Executive Directors of the World Bank to further the Bank’s objective of promoting international investment.
ICSID is an independent, depoliticized and effective dispute-settlement institution.
Its availability to investors and States helps to promote international investment by providing confidence in the dispute resolution process.
It is also available for state-state disputes under investment treaties and free trade agreements and as an administrative registry.
ICSID provides for the settlement of disputes by conciliation, mediation, arbitration or fact-finding.

Russia’s oil imports to India rises further, trade deficit balloons

Context: India accounts for more than 70% of the seaborne supplies of the grade so far this month and China for about 20%. In February 2023, Russia surpassed Saudi Arabia to become the second biggest exporter of crude oil to India in FY23 (Iraq being the first).

Why India and China are demanding Russian Oil?

Because Russian oil is fall cheaper than the western nations’ oil (about $10 cheaper).

Why China is at advantage than India?

Majority of Chinese oil imports comes through the pipeline while for India it is mainly through the sea trade. Pipeline transport reduced the cost of crude oil to China.

Important statistics as per Ministry of Commerce:

Russia’s share zoomed to second-highest in FY23 from a negligible proportion in the previous years.
This means that the Kremlin is enjoying stronger revenues despite the West’s attempts to curb funds for Russia’s military operations in Ukraine.
But the sudden surge in oil imports meant that India’s trade deficit with Russia ballooned in recent years.
India exports pharma products, crustaceans, tea, coffee and some other products but relatively of much lesser value. And so, India’s trade deficit with Russia has surged in FY23.

Liberalised Remittance Scheme (LRS)

Context: Overseas remittances by Indian residents under the Reserve Bank of India’s Liberalised Remittance Scheme declined by 29%, falling to $1964 million in February 2025, compared to January 2025. Remittances for travel and studies abroad declined in the wake of the sharp fall in students going abroad.

Relevance of the Topic:Prelims: Key facts about the Liberalised Remittance Scheme.

About Liberalised Remittance Scheme (LRS)

As per the Foreign Exchange Management Act, 1999 (FEMA), persons resident in India are free to buy or sell foreign exchange for any current account transaction except for those transactions for which drawal of foreign exchange has been prohibited by the Central Government.
Under the Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both. There are no restrictions on the number of transactions but the cumulative amount should not exceed USD 2,50,000.
The Scheme was introduced on February 4, 2004, with a limit of USD 25,000. The LRS limit has been revised in stages consistent with prevailing macro and micro economic conditions.
Remittances under the LRS facility can be consolidated (clubbed together) in respect of close family members subject to the individual family members complying with the terms and conditions of the Scheme.
The remittances can be made in any freely convertible foreign currency (apart from dollars).
Only certain capital account transactions are allowed under LRS rules such as opening a bank account abroad i.e. a Foreign Currency Account, purchasing real estate property overseas, for making investments overseas which includes investing in shares, mutual funds, and debt instruments amongst others.
The Scheme is not available to corporates, partnership firms, HUF, Trusts etc.

Who is Covered Under this Scheme?

Individuals can avail of foreign exchange facility for the following purposes within the LRS limit of USD 2,50,000 on financial year basis:

Private visits to any country (except Nepal and Bhutan)
Gift or donation
Going abroad for employment
Emigration
Maintenance of close relatives abroad
Travel for business, or attending a conference or specialised training or for meeting expenses for meeting medical expenses, or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment/ check-up
Expenses in connection with medical treatment abroad
Studies abroad
Any other current account transaction which is not covered under the definition of current account in FEMA 1999.

Changes to LRS

The investor who has remitted funds under LRS can retain and reinvest the income earned from his investment made under the scheme. However, the received/unused foreign exchange, unless reinvested, shall be repatriated and surrendered to an authorised person within a period of 180 days from the date of such realisation.
This new rule restrains the residents from keeping money beyond six months in offshore bank accounts. The rule requires them to 'Reinvest' the unused income earned from investments made under LRS from India in foreign securities, mutual funds, properties and other permitted assets.
Union government has decided to cancel its plan to impose a 20% tax on overseas credit card spending, exempting individuals from the levy for payments up to ₹7 lakh per year.
The Finance Ministry stated that it aims to address concerns raised about the applicability of Tax Collection at Source (TCS) to small transactions under the Liberalised Remittance Scheme (LRS).

What is Tax Collection at Source?

It an extra amount collected as tax by seller of specified goods from the buyer at the time of sale over and above the sale amount and is remitted to the government account.

Issues with the new rule:

Typically, a foreign bank will have a requirement of maintenance of minimum balance but the new LRS framework does not provide flexibility to retain excess funds in the bank account beyond a period of 180 days.
Until now, the unutilised funds would mostly be parked in a bank account, which offer minimal risk of capital loss, but now the same money which needs to be invested in securities incurs a potential risk.

Need for changes:

Along with change in LRS rules, Finance minister increased tax collection at source for foreign remittances to 20%. These measures were aimed to curb remittances outflows:

LRS remittances by Indians saw a sharp uptick in the last few years, thanks to booming stock markets and other lucrative investment opportunities including cryptocurrencies.
In 2021-22, Indians sent $20 billion overseas via LRS, up from $13 billion in FY21, RBI data showed. In the period between October to December 2022, residents sent $6 billion via LRS.
Such outward remittances add pressure to the forex reserves of the country, especially when there is FPI sell-off in Indian markets due to fed-tapering or when global oil prices are already high.

Free Trade Agreements (FTAs)

What are FTAs?

FTAs are arrangements between two or more countries or trading blocs that primarily agree to reduce or eliminate customs tariff and non tariff barriers on substantial trade between them.
FTAs normally cover trade in goods (such as agricultural or industrial products) or trade in services (such as banking, construction, trading etc.). FTAs can also cover other areas such as intellectual property rights (IPRs), investment, government procurement and competition policy, etc.

Stages of Trade Integration

Preferential Trade Agreement (PTA): In a PTA, two or more partners agree to reduce tariffs on an agreed number of tariff lines. The list of products on which the partners agree to reduce duty is called a positive list. India MERCOSUR PTA is such an example. However, in general PTAs do not cover substantially all trade.
Free Trade Agreement (FTA): In FTAs, tariffs on items covering substantial bilateral trade are eliminated between the partner countries; however, each maintains an individual tariff structure for non-members. India Sri Lanka FTA is an example. The key difference between an FTA and a PTA is that while in a PTA there is a positive list of products on which duty is to be reduced; in an FTA there is a negative list on which duty is not reduced or eliminated. Thus, compared to a PTA, FTAs are generally more ambitious in coverage of tariff lines (products) on which duty is to be reduced.
Comprehensive Economic Cooperation Agreement (CECA)/Comprehensive Economic Partnership Agreement (CEPA): These terms describe agreements which consist of an integrated package on goods, services and investment along with other areas including IPR, competition etc. The India-Korea CEPA is one such example and it covers a broad range of other areas like trade facilitation and customs cooperation, investment, competition, IPR etc.
Custom Union: In a Customs union, member countries may decide to trade at zero duty among themselves, however they maintain common customs duty against the rest of the world. Example: Southern African Customs Union (SACU) - South Africa, Lesotho, Namibia, Botswana and Swaziland.
Common Market: Integration provided by a Common market is one step deeper than that by a Customs Union. A common market is a Customs Union with provisions to facilitate free movements of labour and capital, harmonise technical standards across members etc. The European Common Market is an example.
Economic Union: Common Market extended through further harmonisation of fiscal/monetary policies and shared executive, judicial and legislative institutions among the member countries. The European Union (EU) is an example.

Early Harvest Package

The UK has recently stated that it wants an early harvest trade package with India prior to finalisation of a full-fledged free trade agreement.
Early harvest scheme is a precursor to a free trade agreement (FTA) between two trading partners. This is to help the two trading countries to identify certain products for tariff liberalisation before the conclusion of FTA negotiation.
The EHS has been used as a mechanism to build greater confidence amongst trading partners to prepare them for even bigger economic engagement.

How is CECA/CEPA different from FTA?

A Comprehensive Economic Cooperation Agreement (CECA) or a Comprehensive Economic Partnership Agreement (CEPA) is different from a traditional Free Trade Agreement (FTA) on two counts:
- Firstly, CECA/CEPA are more comprehensive and ambitious than an FTA in terms of coverage of areas and the type of commitments. While a traditional FTA focuses mainly on goods; a CECA/CEPA is more ambitious in terms of a holistic coverage of many areas like services, investment, competition, government procurement, disputes etc.
- Secondly, CECA/CEPA looks deeper at the regulatory aspects of trade than an FTA. It is on account of this that it encompasses mutual recognition agreements (MRAs) that cover the regulatory regimes of the partners. An MRA recognises different regulatory regimes of partners on the presumption that they achieve the same end objectives.

Rationale for signing Free Trade Agreements

By eliminating tariffs and some non-tariff barriers FTA partners get easier market access into one another's markets.
Exporters prefer FTAs to multilateral trade liberalisation because they get preferential treatment over non-FTA member country competitors. For example in the case of ASEAN, ASEAN has an FTA with India but not with Canada. ASEAN's custom duty on leather shoes is 20% but under the FTA with India it reduced duties to zero. Now assuming other costs being equal, an Indian exporter, because of this duty preference, will be more competitive than a Canadian exporter of shoes. Secondly, FTAs may also protect local exporters from losing out to foreign companies that might receive preferential treatment under other FTAs.
Possibility of increased foreign investment from outside the FTA. Consider 2 countries A and B having an FTA. Country A has a high tariff and a large domestic market. The firms based in country C may decide to invest in country A to cater to A's domestic market. However, once A and B sign an FTA and B offers a better business environment, C may decide to locate its plant in B to supply its products to A.
Such occurrences are not limited to tariffs alone but it is also true in the case of non-tariff measures. Especially when a Mutual Recognition Agreement (MRA) is reached between countries A and B. Some experts are of the view that slow progress in multilateral negotiations due to complexities arising from large numbers of countries to reach a consensus on polarising issues, may have provided the impetus for FTAs.

How is India placed globally in terms of its bilateral PTAs/FTAs/ CECAs/CEPAs?

India has preferential access, economic cooperation and Free Trade Agreements (FTA) with about 54 individual countries. India has signed bilateral trade deals in the form of Comprehensive Economic Partnership Agreement (CEPA)/ Comprehensive Economic Cooperation Agreement (CECA)/FTA/Preferential Trade Agreements (PTAs) with some 18 groups/countries.
India is a late, and cautious, starter in concluding comprehensive preferential tariff agreements covering substantially all trade with some of its trading partners.

List of FTAs Signed By India

PTAs in Force: Asia Pacific Trade Agreement (APTA); India- Afghanistan; India-Mercosur; India-Chile.
FTAs in force India- Sri Lanka; SAARC FTA; India –ASEAN FTA; India - South Korea CEPA; India - Japan CEPA; India - Malaysia CECA; India-Singapore CECA; India-Nepal; India-Bhutan. India-Australia ECTA (They are negotiating to upgrade it to a CEPA).
FTAs in Negotiation: India –EU BTIA; India- Canada FTA; India- New Zealand FTA etc.

Are there provisions for review and implementation of FTAs?

Yes, the FTAs have provisions for review and implementation. This is normally done at specified intervals and there is an institutional mechanism to undertake such a review.
It is important for stakeholders to provide regular feedback on the operation of the FTAs for this mechanism to be effective. For example, problems faced in SPS/TBT measures or other NTMs need to be highlighted.

Relationship between Multilateralism and FTAs?

Article 1 of GATT (General Agreement on Tariffs and Trade) which enunciates the most favoured nation (MFN) principle of World Trade Organisation (WTO) states that "any advantage, favour, privilege, or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties."
However, exemptions from this MFN principle are permitted for forming FTAs under specific conditions as per the following provisions of the WTO Agreements:
- Article XXIV of GATT for goods.
- Article V of GATS (General Agreement on Trade in Services) for services.
The specific conditions under Article XXIV of the GATT permitting FTAs, are:
- FTA members shall not erect higher or more restrictive tariff or non-tariff barriers on trade with non-members than existed prior to the formation of the FTA.
- Elimination of tariffs and other trade restrictions be applied to "substantially all the trade between the constituent territories in products originating in such territories."
- Elimination of duties and other trade restrictions on trade within the FTA to be accomplished "within a reasonable length of time," meaning a period of no longer than 10 years
Moreover, the "Enabling Clause, 1, allows developing countries to form preferential trading arrangements without adhering to the conditions under Article XXIV.

Foreign Exchange Reserves

Context: Reserves have fallen from an all-time high of $645 billion in October 2021 to $575.27 billion in February 2023. However, India’s forex reserves increased by $6.306 billion to $584.755 billion for the week ended April 7.

What are Foreign Exchange Reserves?

Foreign exchange reserves refers to the reserves of the RBI kept in the form foreign currency assets, gold, SDR and reserve tranche position with the IMF.
The forex reserve is kept as a cushion against any potential balance of payment related crisis. In India, the Reserve Bank of India Act 1934 enables the RBI to act as the custodian of foreign reserves.

Composition of Foreign Exchange Reserves

Forex reserves in India comprise of Foreign Exchange assets (FEAs), Gold, Special Drawing Rights (SDRs) and Reserve Position in the IMF.
Foreign Exchange assets (FEAs): Consists of major global currencies + Investments in US Treasury bonds, bonds of other selected governments, deposits with foreign central and commercial banks. Even though, Foreign Exchange assets (FEAs) are maintained in major currencies, the foreign exchange reserves are denominated and expressed in US dollar terms.
Reserve Position in the IMF: Subscription of quota consists of two components: (i) foreign exchange component and (ii) domestic currency component. Under the foreign exchange component, a member is required to pay 25% of its quota in SDRs or in foreign currencies. This is termed as “reserve position in the IMF or reserve tranche” and is part of the member country’s reserve assets.
Foreign Currency Assets (88%) > Gold (8%) > SDR (3.2%) > RTP (0.8%)

Reasons for Decline

FPI outflows: mainly due global inflation post Russia-Ukraine war and hike of interest rates by US Federal Reserve.
Rupee depreciation: by around 10% against the US dollar and became the worst performing Asian currency in 2022. As a result, RBI had to intervene in the forex market to defend the rupee thereby declining forex reserves.
Valuation loss: Foreign exchange reserves are maintained as a multi-currency portfolio comprising major currencies such as the US dollar, Euro, Pound sterling, and Japanese yen, among others, but are valued in terms of US dollars. When the dollar strengthens, the valuation of other currencies vis-à-vis the US currency declines, leading to notional fall in the overall reserves position.

How Much Forex Reserves is Sufficient?

Though there is no objective formula/criterion to arrive at a specific amount, there are few factors that are considered to determine the adequacy of foreign exchange reserves of an economy, which include:
- Import Cover: Number of months of imports that could be paid for by Forex Reserves.
- Greenspan-Guidotti rule: Forex reserves should be sufficient to pay the short-term External Debt.
- Level of short-term debt: IMF suggests that a country's reserves should equal short-term external debt (one-year or less maturity), suggesting a ratio of reserves-to-short term debt of one.
- Source of accretion of reserves: Whether the forex reserves are made up of export or foreign investments (FDI & FPI) or external borrowings.
- Levels of Current account deficit: To what extent the CAD can be financed by the existing foreign reserves.

Textile, apparel exports decline 14%

Context: Textile and apparel exports contracted 14% in 2022-2023 compared with the previous year. At $41.3 billion in exports in 2021-2022, textiles and apparel constituted 9.79% of total goods exports. However, in 2022-2023, the segment recorded exports of $35.5 billion and constituted just 7.95% of goods exports.

Reasons for India’s Underperformance in Exports

Low Level of Participation in Global Value Chains (GVCs).
Limited diversification of India’s export basket: The top 10 principal exports in terms of commodity groups account for 78% of total merchandise exports.
Low competitiveness of Indian products on account of:

Lacklustre infrastructure.
Complex land and labour laws.
Fragmented and unregulated logistics sector.

Inability to exploit comparative advantage in lower-skilled and labour-intensive exports: India has seen its share of world trade in textiles, garments and footwear decline in recent years while Bangladesh has almost caught up to India, and Vietnam has overtaken it.
Regional Disparities: 70% of India’s export has been dominated by 5 states.

Intra- and inter-regional disparities in export infrastructure as coastal states have performed extremely well compared to the landlocked states in developing export promotion parks and hubs.
Poor trade support and growth orientation among states: There is an absence of strong support towards the exporters from many state governments in improving their quality or quantity.
Poor research & development infrastructure to promote complex and unique exports curbing the innovative tendencies at the subnational level.

Why India Needs an Export-Led Growth?

Economic Survey 2019 has advocated an export-led growth model for India for reasons:

Exports can help India to achieve the target of making India a developed economy by focusing on ‘Atma Nirbhar Bharat’.
Economic Growth: Higher exports draw more foreign remittances, create more jobs and lower the current account deficit, creating demand and infrastructure.
Major economies around the world are also major exporters. To corroborate this claim, it is to be noted that China is the world’s leading exporter of goods.

Becoming a part of Global Value Chains: Exports give domestic sellers increased access to the market that helps in presenting a golden opportunity to capture a good chunk of global market share.
Mitigate Regional Disparities: Improving the export competitiveness of states can mitigate regional disparities through export-led growth and the consequent rise in standard of living.
The Economic Survey established that states which engage with the world markets as well as with the other states within the country are richer.

Initiatives to enhance trade

Focus on Agricultural Products: Pro-active support of export promotion agencies including Export Inspection Council, Plantation Boards, and Agricultural and Processed Food Products Export Development Authority (APEDA), and export facilitating measures like online issuance of certificates required for exports, aided growth of agricultural exports.
Interest Equalisation Scheme: This Scheme was formulated to give benefit in the interest rates being charged by the banks to the exporters on their pre- and post-shipment rupee export credits.
Remission of Duties and Taxes on Exported Products (RoDTEP) scheme: The scheme seeks remission of Central, State and Local duties/taxes/levies at different stages at the Central, State, and local level, which are incurred in the process of manufacturing and distribution of exported products, but are currently not being refunded under any other duty remission scheme.
Export Credit Guarantee: The Export Credit Guarantee Corporation (ECGC) supports Indian exporters and banks by providing export credit insurance services. ECGC provides insurance cover on the export consignment to protect exporters from the consequences of the payment risks. It also provides Export Credit Insurance to Banks (ECIB) to protect the Banks from losses on account of export credit given to exporters due to the risks of insolvency and/or protracted default of the exporter borrower.
Krishi Udan Scheme: Krishi Udan Scheme was launched in August 2020 on international and national routes to assist farmers in transporting agricultural products so that it improves their value realisation. Krishi Udan 2.0 was launched in October 2021 enhancing the existing provisions, mainly focusing on transporting perishable food products from the hilly areas, North-Eastern states, and tribal areas.
Trade Infrastructure for Export Scheme: The Scheme provides financial assistance in the form of grant-in-aid to Central/State Government owned agencies for setting up or for up-gradation of export infrastructure as per the guidelines of the Scheme
Districts as Export Hubs – One District One Product (ODOP) Initiative: The Districts as Export Hubs-ODOP initiative is aimed at targeting export promotion, manufacturing, and employment generation at the grassroots level, making the States and Districts meaningful stakeholders and active participants in making India an export powerhouse The initiative is also aimed at fostering balanced regional development across all districts of the country. It seeks to select, brand, and promote products/services from each district of the country for enabling holistic socioeconomic growth across all regions, and attract investment in the district to boost manufacturing and exports.

Recommendations of High Level Advisory Group (HLAG) by Ministry of Commerce

Technology
- Has a profound influence on manufacturing. It will more significantly impact the relative competitiveness of exports. Tools like big data analytics, industry 4.0 must be leveraged.
Financial support to industry
- Government should aim for an effective corporate tax rate of 18%. It should also bring down the cost of capital to an average of 10 best performing OECD countries.
- Enhance capital base of EXIM Bank and Export Credit Guarantee Corporation.
Good Governance
- Promote evidence based policy making with a well structured Management Information System (MIS).
Also, strengthen the investment promotion agency and build an overarching Trade Promotion Organisation.
Identify Champion sectors
This will help overcome challenges of infrastructural deficiency. 12 champion services present comprehensive potential to enhance GDP.
Link into Global & Regional Value Chains
Integrated approach towards trade in goods, services & investments requires a strategy of generally lower & simplified tariffs. Need to identify products & segments where Indian firms can integrate into GVCs.
Use of World Trade Organisation: as part of its overall strategic vision
Constitute inter-ministerial group to disseminate and evolve national official thinking on WTO related issues.
Role of Regional Trade Agreements (RTAs) is crucial
- However, a comprehensive yet selective & inclusive approach is required.
Launch 5 year program for negotiation of FTA - identified based on complementarity & sustainability.

The lesser-known battles of Maoist women

Context: The article reflects that everything is not well in the Communist Party of India (Maoist) which, besides waging an armed struggle to capture political power, also claims to fight for gender equality. The Maoists profess discipline and integrity, but exploitation of women in the party is a stark reality. Women who join the party in the hope of bringing about a “revolution” for the proletariat and the landless class are often subject to the same structural violence that they are supposed to fight.

Gender issues within the movement

Under-representation: Women constitute 35%-40% of the total party members, but their representation in the Central Committee and the Dandakaranya Special Zonal Committee (DKSZC) is negligible.
Health issues: While jungle life is difficult for all cadres, the women have to face additional health challenges
The women cadres in the CPI(Maoist) don’t get even get sentry duty off and need to be alert all the time with a gun. In addition, they have to walk for miles daily to change their location.
Basic necessities ignored: Further Women are not permitted to liberally use water. Each cadre has to carry water in bottles for her own use. It is taboo to use water from streams or ponds for washing. Women are at the mercy of the unit commander who carries some medical necessities.
Lacking nutrition: Most women who are not conscious of their nutrition intake, particularly iron, become anaemic
Exploitation: There are instances of women cadres dying by suicide on account of ill treatment or suspicion.

Origin of left-wing movement in India

Naxalite are a group of left radical communist and the supporter of Maoist political ideology. The word Naxalite derived from the word "Naxalbari" which is the name of a village of west Bengal where a peasant insurgencies took place on 1967 against the landlords. Generally the majority of people of naxalite group are belongs to labourer, adibashi, and unemployed and mostly of them are living in remote area where the development failed to reach yet.
In India about 8% people are adhibasi and 92% of them living in tribal areas such as forest and hills and this tribal areas are far away from development or the government failed to give them a secure or peaceful life and this are the main causes for increasing number of naxalite movement in this areas. According shri Gadar "the revolutionary poet support Naxalism and said Naxalism is the result of failure of democracy."
The left-wing movement was originated under the aegis of Kanu Sanyal, Charu Majumdar and Jangal Santhal.
Kanu Sanyal, who was the follower of communist ideology thought that the economic freedom will come when you fight with maximum wealth holder
Charu Majumdar, who were inspired by the various ideology of Mao Zedong of China. He said, "That Indian peasants and lower class tribal's overthrow the government and upper class by force for whom he held responsible for their commitment." A large of urban elites were also attracted to the ideology, which spread through Charu Majumdar writing particularly the "eight historic documents" which formed basis naxalite ideology. Charu Majumdar wanted a prolonged people's war in India similar to Chinese revolution 1949.
The Naxalite movement first time appeared on 1967 in Naxalbari village of West Bengal by peasants against the landlords and this movement was leading by Charu Majumdar, Kanu Sanyal, and Jangal Santhal.. Initially the Naxalite movement originated in West Bengal and had later moved to the less developed rural areas in southern and eastern India including in the state of chhatisgarh, Odisha, Andhrapradesh, and telengana. This was testified by the fact that as per 1971 census, about 60% of people of the population were landless and the major share of land were in the hands of 4% richest peoples. The peasants were exploited by the landlords raised their bow and arrows in insurgencies. And this was the primary cause of this movement.

Causes of Left-Wing Extremism

Land Related Factors

Evasion of land ceiling laws.
Existence of special land tenures (enjoying exemptions under ceiling laws).
Encroachment and occupation of Government and Community lands (even the waterbodies) by powerful sections of society.
Lack of title to public land cultivated by the landless poor.
Poor implementation of laws prohibiting transfer of tribal land to non-tribals in the Fifth Schedule areas.
Non-regularisation of traditional land rights.

Displacement and Forced Evictions

Eviction from lands traditionally used by tribals.
Displacements caused by irrigation and power projects without adequate arrangements for rehabilitation.
Large scale land acquisition for ‘public purposes’ without appropriate compensation or rehabilitation.

Livelihood Related Causes

Lack of food security – corruption in the Public Distribution System (which is often non-functional).
Disruption of traditional occupations and lack of alternative work opportunities.
Deprivation of traditional rights in common property resources.

Social Exclusion

Denial of dignity.
Continued practice, in some areas, of untouchability in various forms.
Poor implementation of special laws on prevention of atrocities, protection of civil rights and abolition of bonded labour etc.

Governance Related Factors

Corruption and poor provision/non-provision of essential public services including primary health care and education.
Incompetent, ill-trained and poorly motivated public personnel who are mostly absent from their place of posting.
Misuse of powers by the police and violations of the norms of law.
Perversion of electoral politics and unsatisfactory working of local government institutions.
These causes are most glaring in forest areas predominantly inhabited by tribal populations who thus become the main instruments and victims of left extremist violence.

Sources of Funding for Naxalites

Financial mobilisation by Naxalites is in the form of extortion from local people and from contractors executing various projects in the affected areas. Besides, funds are also raised through forest and mining operations.
The extensive contractor-transporter-extremist nexus and its links with illegal mining and collection of forest produce in the entire region affected by left extremism yields a huge volume of funds for the extremists.

Government’s Approach And Action Plan To Curb Lwe

The Government of India has adopted an integrated and holistic approach to deal with the Left-Wing Extremist (LWE) insurgency by simultaneously addressing the areas of security, development and promoting good governance. To achieve this, a National Policy and Action Plan has been put in place that adopts a multi-pronged strategy in the areas of security, development, ensuring rights & entitlements of Other Traditional Dwellers /Tribals etc with focused attention on 106 Districts in 10 States and particularly in 35 most affected LWE districts in 07 States.

Specific Measures taken by Central government

‘Police’ and ‘public order’ are state subjects. Central government, however, closely monitors situation and coordinates and supplements their efforts in several ways to deal with the LWE problem.
Ban on CPI (Maoist): This organisation is responsible for most incidents of violence/casualties.
Strengthening the Intelligence Mechanism: This includes intelligence sharing through Multi-Agency Centre (MAC) at the Central level and State Multi Agency Centre (SMAC) at the State level on 24x7 basis.
Better Inter-State coordination: The menace of Maoists is spread across various states. Thus, Government of India has taken a number of steps to improve Inter-State coordination through periodic Inter-State meetings and facilitating interactions between the bordering districts of LWE affected States.
Tackling the problem of Improvised Explosive Devices (IEDs): Majority of casualties incurred by the Security force are attributable to IEDs. The Ministry of Home Affairs has formulated an SOP on ‘Issues related to Explosives/IEDs/Landmines in Naxal Affected Areas’ and circulated to all stakeholders concerned for compliance.
Deployment of the Central Armed Police Forces
India reserve (IR)/Specialised India Reserve Battalion (SIRB): The Left-Wing Extremism affected states have been sanctioned India Reserve (IR) battalions mainly to strengthen security apparatus at their level and to enable the States to provide gainful employment to youth, particularly in the LWE affected areas.

Development measures taken by Government
Monitoring and Implementation of Flagship Programs:(a) Pradhan Mantri Gram Sadak Yojana (PMGSY)(b) National Rural Health Mission (NRHM)(c) Ashram School(d) Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)(e) Sarva Shiksha Abhiyan (SSA)(f) National Rural Drinking Water Program (NRDWP)(g) Pradhan Mantri Kaushal Vikas Yojana (PMKVY)(h) Deen Dayal Upadhyay Gram Jyoti Yojana (DDUGJY)(I) Integrated Child Development Services (ICDS)(j) Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Right) Act, 2006.

Way forward

Left extremism feeds on persistent and serious shortcomings in the domain of general and

development administration, resulting in the failure of the government to address the needs of the poor in areas pertaining to land, food, water and personal security, equity, ethnic/cultural identity etc. The ‘containment’ of the problem may inter alia require consideration of the following:

Most of the ‘participants’ in violence perpetrated under the banner of left extremist organisations are alienated sections of society rather than perpetrators of ‘high treason’ – they must be treated as such.
A fortiori police action over a long period is counterproductive; it is likely to affect the innocent more than the extremists.
Negotiations have a definite ameliorative role under the circumstances; this is the experience the world over.
Faithful, fair, and just implementation of laws and programs for social justice will go a long way to remove the basic causes of resentment among aggrieved sections of society.
Sustained, professionally sound and sincere development initiatives suitable to local conditions along with democratic methods of conflict resolution must be developed.