Vocabulary Builder — Essay & Answer Writing
Arbitrage
The simultaneous purchase and sale of the same asset, currency, or commodity in different markets to profit from price differentials; in broader usage, the exploitation of any regulatory, price, or structural gap between two systems for economic or strategic advantage
French arbitrage (decision, judgement) — from arbitrer (to judge, to arbitrate) — originally referring to settlement of disputes by an arbitrator
"India's energy arbitrage strategy — buying discounted Russian crude while simultaneously signing US LNG agreements — allows New Delhi to reduce its import bill while hedging against supply concentration risk, though it risks US pressure if the gap between stated values and trade behaviour widens."
Relevant for GS3 (Economy — India's energy policy, trade) and GS2 (IR — multi-alignment doctrine). Key context: India exploited oil price arbitrage after Russia-Ukraine war (2022) — Russian crude at $25-35 discount to Brent. India now imports ~40% crude from Russia (FY26) vs near-zero before 2022. Regulatory arbitrage in banking — entities exploiting gaps between different regulatory regimes (shadow banking). Tax arbitrage — using treaty shopping and offshore structures. India's GIFT City is partly designed around regulatory arbitrage to attract financial services.
