Differentiating balance of trade and balance of payment

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Question1) Explain the composition and direction of India’s foreign trade in post liberalization period of Indian Economy

Question2) Differentiate Balance of Trade and Balance of Payment and enumerate a variety of items included in the Current Account, Capital Account and Financial Account of a Balance of Payment.

Question3) Describe the main reasons for the negative balance of payment of India since 1947. Suggest some measures to meet the situation.

Question4) Write short notes on:

a) Counter Trade


c) Special Economic Zones


e) Antidumping Duty                                    


Case Study

As trade quotas have been eliminated under GATT and tariffs have been rationalized under WTO; focal point of disputes and negotiations in international trade has shifted to non-tariff barriers (NTBs), particularly Sanitary and Phyto-sanitary (SPS) standards. Though, in the absence of any past experience and concrete scientific or empirical evidence, standards are generally kept at prohibitively high levels, thus inducing sub-optimal outcomes. One such case is mango trade dispute between India and USA. India ranks first in mango production worldwide, supplying about 40 per cent of world mangoes; whereas, USA is world’s biggest mango importer accounting for 35.7% of the total imports worldwide during 2011-12. However, USA imposed a ban on import of Indian mangoes between 1989 and 2006 due to high pesticide levels and incidence of pests. US permitted import of mangoes from India in 2006 under high standards and strict inspection norms.

As the importing nation, US have four policy options:

i) A complete ban on mango trade, which was in application between 1989 and 2006;

ii) Hot Water Treatment (HWT), policy advocated by India;

iii) Nuclear irradiation, the policy favoured by US and presently in force, and;

iv) Free trade, policy regime with no SPS standards in place.


Question1) Suggest the best options for India in this case.

Question2) Explain the Sanitary and Phyto-sanitary (SPS) standards agreement of WTO.

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International Economics: Differentiating balance of trade and balance of payment
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