UPSC Prelims Practice Questions — The problem with India’s free trade agreement strategy

Q1. India's Regional Trade Agreements and Free Trade Agreements — from the early Comprehensive Economic Cooperation Agreements to the recent India–UK and India–EU pacts — are negotiated on India's behalf by which one of the following?

  • A. The Directorate General of Foreign Trade, Ministry of Commerce and Industry
  • B. The Directorate General of Trade Remedies, Ministry of Commerce and Industry
  • C. The Department of Commerce, Ministry of Commerce and Industry
  • D. The Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry

Q2. In the terminology under which India counts its trade pacts in force, a 'Regional Trade Agreement' is best described as which one of the following?

  • A. A reciprocal preferential arrangement confined to partners belonging to the same geographical region, notified to the WTO
  • B. A reciprocal preferential arrangement between two or more partners, which need not belong to the same geographical region, notified to the WTO
  • C. A non-reciprocal preferential arrangement extended by a developed partner to developing partners, notified to the WTO
  • D. A reciprocal arrangement limited to tariff concessions on an agreed list of goods, without services or investment disciplines

Q3. Consider the following statements comparing the India–UK Comprehensive Economic and Trade Agreement (CETA) with the India–EFTA Trade and Economic Partnership Agreement (TEPA): 1. The India–UK CETA was signed in July 2025, whereas the India–EFTA TEPA had been signed earlier, in March 2024. 2. The India–EFTA TEPA entered into force before the India–UK CETA did. 3. The India–EFTA TEPA carries a quantified investment commitment by the partner side, whereas the India–UK CETA instead sets a bilateral trade value target for 2030. Which of the statements given above is/are correct?

  1. The India–UK CETA was signed in July 2025, whereas the India–EFTA TEPA had been signed earlier, in March 2024.
  2. The India–EFTA TEPA entered into force before the India–UK CETA did.
  3. The India–EFTA TEPA carries a quantified investment commitment by the partner side, whereas the India–UK CETA instead sets a bilateral trade value target for 2030.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q4. With reference to India's trade agreements, consider the following: 1. India–Oman Comprehensive Economic Partnership Agreement 2. India–New Zealand Free Trade Agreement 3. India–European Union Free Trade Agreement 4. India–Mauritius Comprehensive Economic Cooperation and Partnership Agreement Which of the above is/are correctly identified as agreements that India signed, or whose negotiations India concluded, during the financial year 2025-26?

  1. India–Oman Comprehensive Economic Partnership Agreement
  2. India–New Zealand Free Trade Agreement
  3. India–European Union Free Trade Agreement
  4. India–Mauritius Comprehensive Economic Cooperation and Partnership Agreement
  • A. 1 and 4
  • B. 2 and 3 only
  • C. 1, 2 and 3
  • D. 1, 3 and 4

Q5. A free trade area in goods formed between India and a group of developed-country partners, such as the EFTA States, is permitted as an exception to the most-favoured-nation obligation under which one of the following?

  • A. Article V of the General Agreement on Trade in Services
  • B. Article XX of the General Agreement on Tariffs and Trade, 1994
  • C. Paragraph 2(c) of the Enabling Clause of the GATT
  • D. Article XXIV of the General Agreement on Tariffs and Trade, 1994

Q6. Once an Indian CEPA, CECA or trade-in-goods agreement enters into force, the task of tracking and reviewing its implementation with the partner side is discharged by which one of the following?

  • A. The Directorate General of Foreign Trade, which administers the Foreign Trade Policy and issues origin documentation
  • B. A joint committee or joint review mechanism constituted by the parties under the agreement itself
  • C. The Committee on Regional Trade Agreements of the World Trade Organization at Geneva
  • D. The Directorate General of Trade Remedies, which investigates injury to domestic industry from imports

Q7. India officially reported a 'merchandise trade deficit' of US$ 333.19 billion for FY 2025-26, a figure central to the critique of import-driven FTA outcomes. This quantity measures which one of the following?

  • A. The excess of goods and services imports over goods and services exports, the two taken together
  • B. The excess of goods imports over goods exports, netted against the surplus earned on trade in services
  • C. The excess of goods imports over goods exports, with trade in services excluded from both sides of the calculation
  • D. The excess of total imports over total exports, netted against inward remittances and investment income flows

Q8. The assessment, cited by the Government in 2026, that India ranks third among Global South economies on the diversity index of trade partnerships is drawn from which one of the following publications?

  • A. The World Trade Report 2025 of the World Trade Organization
  • B. The Trade and Development Report 2025 of the United Nations Conference on Trade and Development
  • C. The Global Economic Prospects 2025 of the World Bank
  • D. The World Economic Outlook 2025 of the International Monetary Fund

Q9. The ongoing review of the ASEAN–India Trade in Goods Agreement is carried forward through a set of subject-wise Sub-Committees under its Joint Committee. Consider the following: 1. Sub-Committee on Rules of Origin 2. Sub-Committee on National Treatment and Market Access 3. Sub-Committee on Customs Procedures and Trade Facilitation 4. Sub-Committee on Trade in Services and Investment Which of the above is/are NOT correctly identified as a Sub-Committee functioning under the AITIGA review process?

  1. Sub-Committee on Rules of Origin
  2. Sub-Committee on National Treatment and Market Access
  3. Sub-Committee on Customs Procedures and Trade Facilitation
  4. Sub-Committee on Trade in Services and Investment
  • A. 1 and 4
  • B. 2 only
  • C. 3 and 4
  • D. 4 only

Q10. With reference to the conditions that a free trade area must satisfy to be lawful under Article XXIV of GATT 1994, which one of the following statements is correct?

  • A. Its members must eliminate duties on the entire range of goods traded between them, without exception lists
  • B. Its members must adopt substantially the same duties and commercial regulations towards all non-members
  • C. Its members must eliminate duties and other restrictive regulations of commerce on substantially all the trade between them
  • D. Its members must not raise barriers against non-members, and the arrangement is permanently exempt from any WTO scrutiny

Q11. As of mid-2026, the formal basis of India's bilateral trade arrangement with the United States is best described as which one of the following?

  • A. A Trade and Economic Partnership Agreement signed in March 2024 and in force since 1 October 2025
  • B. A Comprehensive Economic Partnership Agreement signed but not yet ratified, awaiting entry into force
  • C. A Comprehensive Economic and Trade Agreement signed in July 2025 and in force since 15 July 2026
  • D. A framework understanding for an interim agreement reached in February 2026, with talks on a wider Bilateral Trade Agreement continuing

Q12. In the standard decomposition of a country's participation in global value chains, an economy that predominantly imports components, assembles them and ships the finished product abroad is one whose participation is dominated by which one of the following?

  • A. Forward participation, computed from domestic value added that is re-exported by the trading partner
  • B. Pure double counting, the portion of gross exports that crosses borders more than once
  • C. Backward participation, computed from foreign value added contained in the country's gross exports
  • D. Domestic value added absorbed within the country and never entering cross-border trade