International Trade & Organisations

1️⃣ Introduction: What is International Trade?

International trade refers to the exchange of goods, services, and capital between countries. It helps nations specialize in what they produce best and import what they lack.

Memory Trick: “Export earns, Import learns.”

A. Export and Import – Meaning and Importance

Term	Meaning	Impact on Economy
Export	Selling goods/services to other countries	Earns foreign exchange, boosts GDP
Import	Buying goods/services from other countries	Fulfills domestic demand, may increase deficit

Export = Outflow of goods, Inflow of money
Import = Inflow of goods, Outflow of money

Importance of Foreign Trade

Promotes specialization and efficiency
Generates employment
Earns foreign exchange
Strengthens global relations
Improves standard of living

Trick: Trade = Transport, Revenue, Alliance, Development, Employment.

B. Balance of Trade (BoT) and Balance of Payments (BoP)

Balance of Trade (BoT)

BoT is the difference between a country’s exports and imports of goods.

Formula: BoT = Value of Exports – Value of Imports

Type	Meaning
Favourable	Exports > Imports
Unfavourable	Imports > Exports

Trick: BoT = Goods only, BoP = Goods + Services.

Balance of Payments (BoP)

BoP is a record of all economic transactions (goods, services, income, capital) between residents of a country and the world.

Component	Includes
Current Account	Goods, services, remittances
Capital Account	FDI, loans, investments
Errors & Omissions	Adjustment item

Trick: BoP = BoT + Services + Capital + Errors.

C. International Financial Institutions

1️⃣ World Bank

Founded	Headquarters	Members	Main Institutions
1944 (Bretton Woods Conference)	Washington D.C.	189 countries	IBRD, IDA

Main Institutions:

IBRD (International Bank for Reconstruction and Development)
IDA (International Development Association)

Functions:

Provides long-term loans to developing countries
Infrastructure, poverty reduction, reforms
Education, health, renewable energy projects

Trick: World Bank = Long-Term Development Partner.

2️⃣ International Monetary Fund (IMF)

Founded	Headquarters	Members
1944	Washington D.C.	190+ countries

Functions:

Ensures global monetary stability
Provides short-term loans to overcome BoP crises
Monitors exchange rate policies
Offers technical and policy advice

Trick: IMF = Immediate Money Fund.

3️⃣ World Trade Organization (WTO)

Formed	Headquarters	Members
1995 (Replaced GATT, 1948)	Geneva, Switzerland	160+ countries

Functions:

Promotes free and fair international trade
Reduces tariffs and trade barriers
Settles trade disputes between member nations
Encourages global cooperation on economic policies

Trick: WTO = World’s Trade Organizer.

Comparison – World Bank vs IMF

Basis	World Bank	IMF
Focus	Long-term development	Short-term financial stability
Loans	Infrastructure projects	BoP crises
Nature	Developmental	Regulatory
Founded	1944	1944
HQ	Washington D.C.	Washington D.C.

Trick: Bank builds, IMF balances.

D. Foreign Exchange and Currency Exchange Rate

Foreign Exchange:

It refers to foreign currencies used for international payments and settlements.

Exchange Rate:

The value of one currency in terms of another (e.g., 1 USD = ₹83).

Types of Exchange Rate Systems

Type	Description	Example
Fixed Rate	Govt decides value	Pre-1991 India
Floating Rate	Market determines value	Post-1993 India
Managed Float	Govt intervenes sometimes	India (current system)

Trick: Fixed = Fixed by Govt, Float = Fluctuates by Market.

E. FDI – Foreign Direct Investment in India

Definition:

Investment made by a foreign entity directly into business or infrastructure of another country.

Types of FDI:

Type	Description
Horizontal FDI	Same sector abroad as home country
Vertical FDI	Different stage of production
Conglomerate FDI	Unrelated business investments

Benefits of FDI:

Brings capital, technology, and employment
Boosts exports and GDP
Strengthens industrial base

FDI in India – Key Facts:

Top Investor (2025)	Singapore
Top Sector	Services, IT, Telecom
Regulator	Department for Promotion of Industry and Internal Trade (DPIIT)
Automatic Route	No govt approval needed
Approval Route	Govt permission required

Trick: FDI = Foreign Direct Income.

F. PYQs (Delhi Police, SSC & State Exams)

Q1. Balance of Trade refers to —

A) Export and import of goods only
B) All transactions including services
C) Export of services only
D) Import of capital goods

Show Answer

A) Export and import of goods only

Q2. The headquarters of the World Bank is in —

A) Geneva
B) Washington D.C.
C) Paris
D) New York

Show Answer

B) Washington D.C.

Q3. The IMF provides —

A) Long-term loans for development
B) Short-term loans for BoP crises
C) Agricultural subsidies
D) Infrastructure funds

Show Answer

B) Short-term loans for BoP crises

Q4. WTO was established in —

A) 1945
B) 1950
C) 1985
D) 1995

Show Answer

D) 1995

Q5. The headquarters of WTO is located at —

A) Washington D.C.
B) Geneva
C) Paris
D) New Delhi

Show Answer

B) Geneva

Q6. The value of one currency in relation to another is called —

A) Exchange Rate
B) Fiscal Rate
C) Repo Rate
D) Base Rate

Show Answer

A) Exchange Rate

Q7. FDI in India is regulated by —

A) RBI
B) SEBI
C) DPIIT
D) NABARD

Show Answer

C) DPIIT

Q8. The term “Current Account” appears in —

A) State Budget
B) Balance of Payments
C) Bank Accounts
D) Company Balance Sheet

Show Answer

B) Balance of Payments

Q9. India’s FDI policy allows foreign investment through —

A) Automatic and Approval routes
B) Only Automatic route
C) Only Government route
D) None of these

Show Answer

A) Automatic and Approval routes

Q10. The institution known as the “Lender of Last Resort” is —

A) World Bank
B) IMF
C) WTO
D) ADB

Show Answer

B) IMF

G. Quick Comparison Table

Institution	Founded	Headquarters	Main Role
World Bank	1944	Washington D.C.	Long-term development loans
IMF	1944	Washington D.C.	Short-term financial aid
WTO	1995	Geneva	Trade liberalization

BoP Components Summary

Account	Includes
Current Account	Exports, imports, remittances
Capital Account	FDI, loans, investments
Errors/Omissions	Balancing entries

Final Concept Recap

Export = Outflow of goods, inflow of money
Import = Inflow of goods, outflow of money
BoT = Goods only | BoP = All transactions
World Bank = Long-term | IMF = Short-term | WTO = Trade rules
FDI = Foreign investment → Jobs + Growth
Exchange rate defines currency strength

One-Line Memory: World Bank builds, IMF stabilizes, WTO liberalizes.

1️⃣ Introduction: What is International Trade?

A. Export and Import – Meaning and Importance

Importance of Foreign Trade

B. Balance of Trade (BoT) and Balance of Payments (BoP)

Balance of Trade (BoT)

Balance of Payments (BoP)

C. International Financial Institutions

1️⃣ World Bank

2️⃣ International Monetary Fund (IMF)

3️⃣ World Trade Organization (WTO)

Comparison – World Bank vs IMF

D. Foreign Exchange and Currency Exchange Rate

Foreign Exchange:

Exchange Rate:

Types of Exchange Rate Systems

E. FDI – Foreign Direct Investment in India

Definition:

Types of FDI:

Benefits of FDI:

FDI in India – Key Facts:

F. PYQs (Delhi Police, SSC & State Exams)

Q1. Balance of Trade refers to —

Q2. The headquarters of the World Bank is in —

Q3. The IMF provides —

Q4. WTO was established in —

Q5. The headquarters of WTO is located at —

Q6. The value of one currency in relation to another is called —

Q7. FDI in India is regulated by —

Q8. The term “Current Account” appears in —

Q9. India’s FDI policy allows foreign investment through —

Q10. The institution known as the “Lender of Last Resort” is —

G. Quick Comparison Table

BoP Components Summary

Final Concept Recap

Master International Trade & Organisations for Delhi Police Exam!