Model Question and Answers for APSC | How would the recent phenomena of protectionism and currency manipulation in world trade affect the macroeconomic stability of India?

Ans: The recent phenomena of protectionism and currency manipulation in world trade could have a significant impact on the macroeconomic stability of India.

• Protectionism: If countries around the world increase tariffs and other protectionist measures, it could lead to a decrease in global trade and a slowdown in economic growth. This could lead to a decrease in demand for Indian goods and services, leading to a decrease in exports, which would negatively impact India's trade balance and GDP.
• Currency manipulation: Currency manipulation by other countries can also affect India's macroeconomic For example, if other countries artificially devalue their currency, it makes their goods and services cheaper in the global market, making it more difficult for Indian goods and services to compete. This could lead to a decrease in exports and a decrease in the value of the rupee, which would negatively impact the trade balance and GDP.
• Inflation: Currency manipulation can also lead to inflation in India, as the weaker rupee makes imports more expensive, leading to higher prices for consumers.
• Investment: Protectionism and currency manipulation could also decrease foreign investment in India, as investors may be hesitant to invest in a country that is facing economic uncertainty due to trade tensions.

In summary, protectionism and currency manipulation can have a negative impact on India's macroeconomic stability by decreasing exports, decreasing foreign investment, increasing inflation, and putting pressure on the value of the rupee.