Trade and Finance Bodies for UPSC: IMF, World Bank, WTO, AIIB, NDB, India's FTAs, the US Tariff Shock and Rupee Internationalisation
How UPSC Tests Trade and Finance Bodies
🎯 Exam priority: Tier-1. About 12 of our 100 IR questions are about trade and finance bodies. UPSC asked: the IMF's Rapid Financing Instrument and Rapid Credit Facility (2022); the G20 Common Framework for debt (2022); AIIB's membership and largest shareholder (2019); the New Development Bank's founder and headquarters (2016); the European Stability Mechanism (2016); the renminbi in the SDR basket and the IMFC (2016); the 'Gold Tranche' (2020); the IBRD's role (2025); the GI Act and the WTO (2018); the International Grains Council (2024) and US apple imports (2024). In Mains: the WTO and Doha (2016), WTO reform and the 'trade war' (2018).
The main trick is the same as in the UN chapter: match the body to its function and one fact. This note has four boxes: the Bretton Woods bodies, the WTO and the other banks, India's trade agreements, and rupee internationalisation and the 2025-26 shocks.
The IMF, the World Bank and Debt
The IMF and the World Bank were born at Bretton Woods in 1944. They are specialised agencies of the UN, based in Washington.
The IMF and the World Bank
Body | What it does | Facts UPSC used |
International Monetary Fund (IMF) | Monitors the global economy, lends to members with balance-of-payments problems, and creates the Special Drawing Right (SDR) | SDR basket: US dollar, euro, Chinese renminbi (added October 2016), Japanese yen and pound sterling. Rapid Financing Instrument and Rapid Credit Facility are IMF emergency windows (2022). Reserve (gold) tranche is the part of a member's quota that can be drawn without conditions (2020). The IMFC (International Monetary and Financial Committee) advises the IMF and the World Bank attends as an observer (2016) |
World Bank Group | IBRD (lends to middle-income and creditworthy poor countries; set up in 1944 to rebuild post-war Europe), IDA (concessional credit for the poorest), IFC (private sector), MIGA (guarantees), ICSID (investment disputes) | The IBRD does not work 'single-handedly' on poverty (2025). The Bank's 'Doing Business' report was discontinued in 2021 |
Bank for International Settlements | Central banks' bank (Basel); sets Basel norms | - |
Debt and the G20
The G20 Common Framework (2020) with the Paris Club helps low-income countries with unsustainable debt restructure their loans (2022 PYQ).
The European Stability Mechanism is the eurozone's permanent financing facility for members in trouble (2016); the euro area has 21 members after Bulgaria adopted the euro on 1 January 2026.
The WTO and the New Banks
The WTO and the new banks are in the news every year.
WTO and the regional banks
Body | Facts | Current note |
World Trade Organization (1995, Geneva) | Successor to GATT; about 166 members; rules on goods (GATT), services (GATS) and intellectual property (TRIPS); binding dispute settlement, but the Appellate Body has been non-functional since December 2019. India's Geographical Indications Act, 1999 was enacted to meet TRIPS obligations (2018) | MC14 at Yaoundé (March 2026) ended without agreement: the moratorium on duties on electronic transmissions lapsed for the first time in 26 years, fisheries-subsidy talks were extended, and 66 members launched a plurilateral e-commerce pact (secondary sources) |
Asian Infrastructure Investment Bank (2016, Beijing) | China-led; over 100 members including non-Asian states such as the UK and Germany; China is the largest shareholder and India the second | 2019 PYQ: India is not the largest shareholder |
New Development Bank (2015, Shanghai) | Created by the BRICS; later members include Bangladesh, the UAE, Egypt and Algeria | Set up by BRICS, not APEC (2016 PYQ) |
Asian Development Bank (1966, Manila) | Regional development bank; launched the Nature Solutions Finance Hub for Asia and the Pacific (2025 PYQ) | - |
International Grains Council (London) | India is a member, but membership is not required to trade rice or wheat (2024 PYQ) | - |
India's Trade Agreements and the 2025-26 Tariff Episode
India signed or concluded more trade agreements in 2025 than in any previous year. These are the ones to learn.
India's trade agreements
Agreement | Status | Key facts |
India-UAE CEPA | In force since 1 May 2022 | First of the new-generation agreements; local-currency settlement with the UAE |
India-Australia ECTA | In force since December 2022 | Early-harvest trade deal |
India-EFTA TEPA (Switzerland, Iceland, Norway, Liechtenstein) | Entered into force on 1 October 2025 | USD 100 billion of investment and one million jobs over 15 years |
India-UK CETA | Signed in London in July 2025; implementation reported from 15 July 2026 | 99 per cent of India's exports to the UK get duty-free access; India removes tariffs on 90 per cent of tariff lines; India-UK trade in goods and services was over USD 56 billion in 2024 |
India-Oman CEPA | Concluded during the PM's visit on 17-18 December 2025 | Gulf trade; see the West Asia article |
India-New Zealand FTA | Negotiations announced in March 2025 and concluded in December 2025 | One of India's fastest-concluded FTAs |
India-EU FTA | Concluded and announced on 27 January 2026 at the 16th India-EU Summit | Needs legal scrubbing, cabinet approval and ratification by the European Parliament (secondary) |
India-US interim framework | Announced February 2026; the fuller agreement remained unsigned in October 2026 | US tariff on Indian goods cut from 25 to 18 per cent and the extra 25 per cent Russian-oil penalty dropped (secondary) |
Under negotiation | India-Peru, India-Chile, India-Israel, India-ASEAN (AITIGA review), India-Mercosur expansion | - |
The 2025-26 tariff episode (secondary sources)
In 2025 the US raised tariffs on Indian goods to a peak of 50 per cent, including a 25 per cent penalty tied to India's purchase of Russian oil. In February 2026 a framework for an interim trade agreement cut the rate to 18 per cent and removed the penalty. The wider bilateral trade agreement was still being negotiated in October 2026.
Rupee Internationalisation and Economic Diplomacy
India's finance diplomacy goes beyond free-trade agreements. The MEA Annual Report 2025 lists these tools.
Rupee internationalisation and economic diplomacy
Local Currency Settlement System (LCSS): India has LCSS agreements with the UAE, Indonesia, Mauritius and the Maldives; processes have begun with Qatar, Kuwait, South Africa and Kenya.
Special Rupee Vostro Accounts (SRVAs): operational in 34 countries, letting foreign banks settle trade in rupees.
UPI abroad: acceptance by QR code has been enabled in Bhutan, France, Mauritius, Nepal, Singapore, Sri Lanka and the UAE (the 2025 PYQ asked UAE, France, Germany, Singapore and Bangladesh: three of the five accept merchant payments).
FDI: inflows in the first quarter of 2025-26 reached USD 18.62 billion; India concluded 22 Social Security Agreements by 2025, with talks on over 20 more.
Investment disputes: India faced about 40 investment-treaty claims and won four arbitrations and lost three in 2025.
Critical minerals: the Economic Diplomacy division coordinates overseas acquisition (Africa, Australia, Latin America) under the National Critical Mineral Mission, and India joined the Minerals Security Partnership in 2023.
Further Reading
the Ministry of External Affairs Annual Report, MEA and PIB press releases and joint statements, United Nations and treaty-body websites, and an atlas — the primary sources behind every fact above.
How UPSC Could Ask This Next
Here are the questions this chapter is most likely to produce next.
How UPSC could ask this next
Function questions: 'which institution lends through the Rapid Financing Instrument' (IMF), 'which provides concessional loans to the poorest' (IDA), 'which has its headquarters in Shanghai' (NDB).
Membership statements: India's status in the AIIB, RCEP, APEC, the WTO's committees; 'the largest shareholder is ...'.
Agreements in the news: which agreement entered into force in 2025 (EFTA TEPA), which was concluded in December 2025 (Oman, New Zealand), what the 2026 EU deal covers.
Payments: UPI abroad, LCSS, SRVAs, and the SDR basket.
Mains: WTO reform, the US tariff shock, Doha's failure, the Common Framework for debt, and the NDB and AIIB as alternatives to Bretton Woods.
Test Yourself: Practice Questions and PYQs
Twelve practice questions on the IMF, World Bank, WTO, the banks, India's FTAs and payments, followed by the real UPSC Prelims questions and exact Mains questions.
Practice Questions
Q1. Which of the following currencies are in the IMF's Special Drawing Rights basket?
1. US dollar
2. Chinese renminbi
3. Indian rupee
4. Pound sterling
(a) 1, 3 and 4 only
(b) 1, 2, 3 and 4
(c) 1, 2 and 3 only
(d) 1, 2 and 4 only
Show answer
Answer: (d) — The basket has the dollar, euro, renminbi, yen and pound; the rupee is not included.
Q2. Which of the following institutions gives concessional loans to the poorest countries?
(a) Multilateral Investment Guarantee Agency
(b) International Development Association
(c) International Bank for Reconstruction and Development
(d) International Finance Corporation
Show answer
Answer: (b) — The IDA is the World Bank group's concessional arm; IBRD lends mainly to middle-income countries.
Q3. The headquarters of the New Development Bank is at
(a) Manila
(b) Beijing
(c) Shanghai
(d) New Delhi
Show answer
Answer: (c) — The NDB was created by the BRICS in 2015. The AIIB is in Beijing and the ADB in Manila.
Q4. In the Asian Infrastructure Investment Bank, which country is the largest shareholder?
(a) India
(b) Russia
(c) China
(d) Japan
Show answer
Answer: (c) — India is the second-largest shareholder; the AIIB has over 100 members including non-Asian states.
Q5. The Appellate Body of the WTO dispute settlement system has not been functional since
(a) December 2019
(b) January 1995
(c) December 2008
(d) March 2026
Show answer
Answer: (a) — The US has blocked appointments of Appellate Body members since 2017-19.
Q6. At the WTO's 14th Ministerial Conference in Yaoundé (March 2026),
(a) the Appellate Body was restored
(b) the moratorium on customs duties on electronic transmissions lapsed
(c) a binding fisheries-subsidy agreement was adopted
(d) India joined the Investment Facilitation for Development Agreement
Show answer
Answer: (b) — The conference ended without agreement on the moratorium (secondary sources).
Q7. The India-EFTA Trade and Economic Partnership Agreement came into force on
(a) 1 May 2022
(b) 31 March 2024
(c) 1 October 2025
(d) 1 January 2026
Show answer
Answer: (c) — It has an investment commitment of USD 100 billion and one million jobs over 15 years.
Q8. Which of the following free-trade agreements was concluded in December 2025?
1. India-Oman CEPA
2. India-New Zealand FTA
3. India-EU FTA
(a) 1, 2 and 3
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1 and 3 only
Show answer
Answer: (b) — The India-EU FTA was announced on 27 January 2026.
Q9. Under the India-UK CETA signed in July 2025, what share of India's exports to the UK gets duty-free access?
(a) 75 per cent
(b) 91 per cent
(c) 50 per cent
(d) 99 per cent
Show answer
Answer: (d) — 91 per cent is the share of UK exports to India that gets preferential access.
Q10. India has Local Currency Settlement System agreements with which of the following?
(a) Brazil, Argentina, Chile and Peru
(b) UAE, Indonesia, Mauritius and the Maldives
(c) Russia, China, Iran and Pakistan
(d) USA, UK, Germany and Japan
Show answer
Answer: (b) — Special Rupee Vostro Accounts are operational in 34 countries.
Q11. The International Monetary and Financial Committee (IMFC)
(a) advises the IMF on the direction of its work, with the World Bank as an observer
(b) is a committee of the WTO
(c) regulates the SDR basket without the IMF's Executive Board
(d) is the committee of BRICS finance ministers
Show answer
Answer: (a) — It meets twice a year, at the Spring and Annual Meetings.
Q12. Consider the following countries:
1. UAE
2. France
3. Germany
4. Singapore
How many of them accept UPI merchant payments, according to the MEA Annual Report 2025?
(a) Only two
(b) All four
(c) Only three
(d) Only one
Show answer
Answer: (c) — UAE, France and Singapore accept UPI by QR; Germany is not on the list.
UPSC Previous Year Questions (PYQs)
Real UPSC Prelims questions, checked against the official paper and answer key.
Q1. (2022) 'Rapid Financing Instrument' and 'Rapid Credit Facility' are related to the provisions of lending by which one of the following?
(a) United Nations Environment Programme Finance Initiative
(b) World Bank
(c) International Monetary Fund
(d) Asian Development Bank
Show answer
Answer: (c) — The Rapid Financing Instrument and Rapid Credit Facility are IMF emergency-lending windows.
Q2. (2022) With reference to the 'G20 Common Framework', consider the following statements:
1. It is an initiative endorsed by the G20 together with the Paris Club.
2. It is an initiative to support Low Income Countries with unsustainable debt.
Which of the statements given above is/are correct?
(a) Both 1 and 2
(b) 2 only
(c) 1 only
(d) Neither 1 nor 2
Show answer
Answer: (a) — The G20 Common Framework (with the Paris Club) coordinates debt treatment for low-income countries with unsustainable debt.
Q3. (2019) With reference to Asian Infrastructure Investment Bank (AIIB), consider the following statements:
1. AIIB has more than 80 member nations.
2. India is the largest shareholder in AIIB.
3. AIIB does not have any members from outside Asia.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 and 3 only
(c) 1, 2 and 3
(d) 1 and 3 only
Show answer
Answer: (a) — AIIB has well over 80 members including non-Asian countries, and China, not India, is the largest shareholder.
Q4. (2016) Consider the following statements:
1. New Development Bank has been set up by APEC.
2. The headquarters of New Development Bank is in Shanghai.
Which of the statements given above is/are correct?
(a) 1 only
(b) Both 1 and 2
(c) Neither 1 nor 2
(d) 2 only
Show answer
Answer: (d) — The New Development Bank was created by the BRICS (not APEC) and is headquartered in Shanghai.
Q5. (2016) 'European Stability Mechanism', sometimes seen in the news, is an
(a) agency of EU that provides financial assistance to eurozone countries
(b) agency of EU to deal with the conflicts arising among the member countries
(c) agency of EU to deal with all the bilateral and multilateral agreements on trade
(d) agency created by EU to deal with the impact of millions of refugees arriving from Middle East
Show answer
Answer: (a) — The European Stability Mechanism is the eurozone's permanent fund for financial assistance to member states in difficulty.
Q6. (2016) Recently, which one of the following currencies has been proposed to be added to the basket of IMF's SDR?
(a) Rand
(b) Rouble
(c) Renminbi
(d) Indian Rupee
Show answer
Answer: (c) — The renminbi (yuan) was added to the IMF's SDR basket, effective October 2016, joining the dollar, euro, yen and pound.
Q7. (2016) 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 observer in IMF's meetings.
Which of the statements given above is/are correct?
(a) Neither 1 nor 2
(b) 1 only
(c) Both 1 and 2
(d) 2 only
Show answer
Answer: (c) — The IMFC advises the IMF on the direction of its work, and the World Bank participates in its meetings as an observer.
Q8. (2020) 'Gold Tranche' (Reserve Tranche) refers to
(a) one of the operations of a Central Bank
(b) a loan system of the World Bank
(c) a credit system granted by IMF to its members
(d) a credit system granted by WTO to its members
Show answer
Answer: (c) — The reserve (gold) tranche is the part of a member's quota that it can draw from the IMF without conditions.
Q9. (2025) Consider the following statements in respect of the International Bank for Reconstruction and Development (IBRD):
I. It provides loans and guarantees to middle income countries.
II. It works single-handedly to help developing countries to reduce poverty.
III. It was established to help Europe rebuild after the World War II.
Which of the statements given above are correct?
(a) I, II and III
(b) II and III only
(c) I and II only
(d) I and III only
Show answer
Answer: (d) — IBRD lends to middle-income and creditworthy low-income countries and was created in 1944 for post-war reconstruction; it does not work 'single-handedly'.
Q10. (2018) India enacted The Geographical Indications of Goods (Registration and Protection) Act, 1999 in order to comply with the obligations to
(a) ILO
(b) IMF
(c) UNCTAD
(d) WTO
Show answer
Answer: (d) — India's Geographical Indications Act, 1999 was enacted to meet obligations under the WTO's TRIPS Agreement.
Q11. (2024) Consider the following statements:
1. India is a member of the International Grains Council.
2. A country needs to be a member of the International Grains Council for exporting or importing rice and wheat.
Which of the statements given above is/are correct?
(a) 1 only
(b) Both 1 and 2
(c) Neither 1 nor 2
(d) 2 only
Show answer
Answer: (a) — India is a member of the International Grains Council, but membership is not needed to trade rice or wheat.
Q12. (2024) Consider the following statements:
Statement-I: India does not import apples from the United States of America.
Statement-II: In India, the law prohibits the import of Genetically Modified food without the approval of the competent authority.
Which one of the following is correct in respect of the above statements?
(a) Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
(b) Statement-I is incorrect, but Statement-II is correct
(c) Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
(d) Statement-I is correct, but Statement-II is incorrect
Show answer
Answer: (b) — India does import apples from the USA (Statement-I wrong); Indian law does require approval for GM food imports (Statement-II right).
Mains Practice Questions
Use these to frame full-length answers. You don't have to answer one exactly — they show the angles UPSC tests, so let them guide which points you cover.
What are the key areas of reform if the WTO has to survive in the present context of 'trade war', especially keeping in mind the interest of India?
"The broader aims and objectives of WTO are to manage and promote international trade in the era of globalization. But the Doha round of negotiations seem doomed." Discuss in the Indian perspective.
Evaluate how the India-UK CETA, the India-EFTA TEPA and the India-EU FTA together change India's trade strategy after the 2025 US tariff shock.
Discuss how local-currency settlement and UPI abroad can internationalise the rupee, and their limits.
UPSC Mains — Previous Years’ Questions on this topic (last 10 years)
These are the actual GS Mains questions UPSC has asked on this theme — real proof of how, and when, it is tested. Try to write a full answer to each.
2018 (GS-II): What are the key areas of reform if the WTO has to survive in the present context of 'Trade War', especially keeping in mind the interest of India?
2016 (GS-II): "The broader aims and objectives of WTO are to manage and promote international trade in the era of globalization. But the Doha round of negotiations seem doomed due to differences between the developed and the developing countries." Discuss in the Indian perspective.