The currency swap agreement between India and Japan has been in the news lately, especially in the context of UPSC (Union Public Service Commission) exams. This agreement is an important development in the international trade and diplomacy of India, and it demands a closer look.
What is a Currency Swap Agreement?
A currency swap agreement is a financial arrangement between two countries, in which they agree to exchange their currencies at a pre-determined exchange rate, for a set period of time. It is a tool used by countries to manage their international trade and finance, by reducing their exposure to currency fluctuations and providing a safety net in times of economic turmoil.
India-Japan Currency Swap Agreement
The currency swap agreement between India and Japan was signed in October 2018, for a value of $75 billion. This is the largest currency swap agreement that India has signed with any country so far. The agreement allows for mutual exchange of funds in either Indian rupees or Japanese yen, up to the agreed limit.
The agreement is expected to benefit both countries, in terms of improved trade and investment flows. It will also provide a cushion against any sudden shocks to the global economy, such as a sudden depreciation of the US dollar or a liquidity crisis.
Importance for UPSC Exams
The currency swap agreement between India and Japan is an important topic for UPSC aspirants, especially those who are appearing for the Civil Services Exam. The exam syllabus covers various aspects of international trade and diplomacy, and the currency swap agreement is a significant development in this domain.
Aspirants should be aware of the basic concepts of currency swap agreements, their advantages and disadvantages, and the key features of the India-Japan agreement. They should also be able to explain the impact of the agreement on bilateral trade and investment, and its implications for the global economy.
The currency swap agreement between India and Japan is a significant step towards strengthening the economic ties and strategic partnership between the two countries. It is a reflection of India`s growing clout in the global arena, and its desire to play a more active role in shaping the international order. Aspirants should keep themselves updated on the latest developments in this area, and be well-prepared to handle questions related to it in UPSC exams.