What is capital account convertibility
International Finance Management
Questions:
Following are the data for India’s B.O.P.
|
|
Year 2004-05 |
Rs (in Mn) |
1) |
Merchandise Exports |
3,62,661 |
2) |
Merchandise Imports |
5,33,778 |
3) |
Income on Travel, Transportation MIS |
2,27,762 |
4) |
Payments on Travel, Transportation MIS |
1,63,353 |
5) |
Receipts for Maintenance of Embassies |
1,812 |
6) |
Payments for Maintenance of Embassies |
1,172 |
7) |
Unrequired Transfer Received |
96,318 |
8) |
Unrequired Transfer Outwards |
1,939 |
9) |
Investment Income Received |
21,098 |
10) |
Investment Income paid to Foreign Residents |
39,014 |
11) |
Foreign Investment (FDI, FPI) Received |
2,06,696 |
12) |
Foreign Investment made by Indian Films |
1,53,377 |
13) |
Other Capital Receipts |
2,90,100 |
14) |
Other Capital Outflows |
1,98,016 |
Questions :
Q1. Calculate balance of Visiable Trade?
Q2. Calculate balance of Invisiable Trade?
Q3. Calculate balance of Capital Account?
Q4. Calculate change in Reserves?
The Indian Foreign Exchange market has grown substantially during the liberalization period of the Indian economy. The growth in the retail segment of the market has increased the foreign exchange business turnover of `Authorised Dealers’ while the increase in tourism has boosted the business volumes of `Money Changers’.
Q1. Define Foreign Exchange Market? What are its characteristic features?
Q2. What were the provisions of LERMS?
Q3. What are the function of FEDAI?
Q4. Which is the currency used as vehicle currency in India?
Q5. Who are `Money Changers’?
CASE STUDY 3
|
|
US $ Millions |
1998-1999 |
1999-2000 |
||
|
|
Exports |
34,298 |
|
38,285 |
|
|
|
Imports |
47,544 |
|
55,283 |
|
|
|
Trade Balance |
|
-13,246 |
|
-17,098 |
|
|
Invisibles |
9,208 |
|
12,935 |
|
|
|
Current A/c Balances |
|
-4,038 |
|
-4,163 |
|
|
External Assistance |
820 |
|
901 |
|
|
|
NRI Deposits |
1,742 |
|
2,140 |
|
|
|
Foreign Investments |
2,412 |
|
5,191 |
|
|
|
Borrowings & Others |
3,591 |
|
2,010 |
|
|
|
Total Capital A/c |
|
8,565 |
|
10,242 |
|
|
Overall Balance |
|
4,222 |
|
6,402 |
Given the above data.
Q1. Compile the basic balance?
Q2. Examine the trade balance vis-à-vis the current account balance and explain its effect on the economy?
Q3. Explain the behavior of the Capital Account entries and how can they affect the economy?
Q4. Is the increasing positive `Overall balance’ good for the economy? Why?
CASE STUDY 4
Following the experience of successive financial crises in countries such as Maxico, Russia, Brazil, Turkey & Argentina. Besides South-East Asian countries over the past decade. It is now widely held within policy circles in developing countries that full capital account convertibility, which allows any entity to transfer their funds at will in and out of a country, causes more harm than good.
Q1. What is capital account convertibility?
Q2. What are the risks in capital account convertibility in India context?
Q3. What is the present status of capital account convertibility in India?
Q4. Bring out the arguments in support of convertibility?
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