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    Bop Analysis

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    Manthan Ketan Shah
    The trade deficit improved in 1993 compared to 1992, with exports increasing 21% and imports declining 3.5%. The capital account was boosted by positive foreign investor response to economic reforms. As part of policies to reduce external commercial borrowings, the Indo-Russian payment protocol was signed in 1993 to service Russian debt in rupees rather than roubles from export earnings. This did not affect foreign currency reserves. There was a large increase in non-resident deposits due to balance of payments improvements and schemes offering higher interest rates than global markets.

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    Bop Analysis

    Uploaded by

    Manthan Ketan Shah
    105 views4 pages
    The trade deficit improved in 1993 compared to 1992, with exports increasing 21% and imports declining 3.5%. The capital account was boosted by positive foreign investor response to economic reforms. As part of policies to reduce external commercial borrowings, the Indo-Russian payment protocol was signed in 1993 to service Russian debt in rupees rather than roubles from export earnings. This did not affect foreign currency reserves. There was a large increase in non-resident deposits due to balance of payments improvements and schemes offering higher interest rates than global markets.

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    The trade deficit improved in 1993 compared to 1992, with exports increasing 21% and imports declining 3.5%. The capital account was boosted by positive foreign investor response to economic reforms. As part of policies to reduce external commercial borrowings, the Indo-Russian payment protocol was signed in 1993 to service Russian debt in rupees rather than roubles from export earnings. This did not affect foreign currency reserves. There was a large increase in non-resident deposits due to balance of payments improvements and schemes offering higher interest rates than global markets.

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    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    105 views4 pages

    Bop Analysis

    Uploaded by

    Manthan Ketan Shah
    The trade deficit improved in 1993 compared to 1992, with exports increasing 21% and imports declining 3.5%. The capital account was boosted by positive foreign investor response to economic reforms. As part of policies to reduce external commercial borrowings, the Indo-Russian payment protocol was signed in 1993 to service Russian debt in rupees rather than roubles from export earnings. This did not affect foreign currency reserves. There was a large increase in non-resident deposits due to balance of payments improvements and schemes offering higher interest rates than global markets.

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    of 4

    92-93

    Trade deficit has improved in april-sept 1993 as compared to 1992(less than 1/3rd). Exports increased by 21% and imports declined by 3.5%. Invisibles deficit has significantly lowered in april-Sept 1993 as compared to the same months in 1992. Tourist earnings are a main source of invisible receipts. Foreign investors have shown a positive response towards the economic reforms in this period which has boosted the capital account. Since 92-93 , as part of policies , ECBs have to be reduced. Indo-Russian payment protocol was signed in 93. Russian debt and its servicing is done in rupees rather than roubles. Entire debt servicing is to be made in terms of export of goods and services to Russia.. This didnt effect the state of forign currency reserves To attract non-resident deposits, interst rates offered were higher as compared to global market rates and banks taking these deposists were provided with exchange risk. Their was a high increase in NR deposists on account of improvement in balance of payment situation and partly due to Non resident ruppe deposit scheme and Foreign Currency Non-resident(Banks)FCNR(B)deposits. AID India consortium was held in June 2003, in which $2.2 billion of fast disbursing aid was pledged to support indias policy shifts and to contribute to the development of capitalmarkets and small scale industries. During this time equity investment proposals worth 11000cr were cleared during this period. Forign brokers were given permission to do business in india on behalf of the FII. Exports were adversely affected during 92 december and 93 january on account of post ayodhya developments. Exports to general currency area improved by 13% which laid a sound basis for export performance for 93-94. Among manufacturing sector plastic and linoleum products recorded highest growth followed by gems and jewellery. Favoriable exchange rate, tax exemptions for all export earnings strengthened the exports and simulated domestic demand as well. A large fall in exports from the collapse of Russian markets(which constituted 16.2% of all exports). But we were partly saved by general currency area exports. Negative list of exports is pruned by 146 items. Lifting of ban on trading in south Africa. Import share of POL has increased because of decline in domestic production from off-shore field. Fertilizer imports have decreased due to decontrol of prices of phosphatic and potassic fertilizers. Imports of intermediate inputs have declined due to weak industrial recovery and exchange rate fluctuations. At the new exchange rates, quality of domestic inputs have improved a lot have become more economical. Capital Acoount reduces coz govt policy had limited the growth of ecb, reduced defense debt and encourage non debt creating equity flows.

    94-95 pdf Invisibless account have increased coz of shift of private transfers away from hawala andto secure banking channels Policy to reduce ecbs have bear fruits and Japan bond research institute has upgraded india to investment grade in 94 followed by moodys doing the same. Private sector power and petroleum sector projects are getting finalised so , ecbs have inc (similar trends in next year). Supplier credit has also inc to finance capitalgoods imports IMF funds reduce : Govt decided not to approach IMF for medium term facility. Country made advance repayments of $1.1 billion to the fund in april 94 NR : winding up of foreign currency non resident account in aug 94. No fresh deposists were accepted on this account Foreign investments : GDRs have inc a lot(from 100 million to 3.5 billioon), 7.2 billion $ of FDI deals approved, besides pure equity issues corporate entities were allowed to issue foreign currency convertible bonds(FCCBs)

    The Recession Effect (08-09)


    Emerging market economies like India were not significantly affected by the global financial crisis in the initial stages, which had set in around August 2007. In fact, the initial effect of the global financial crisis was positive, as India received huge Foreign Institutional Investment (FII) inflows of US$ 22.5 billion during September 2007 to January 2008, as against US$ 11.8 billion during April-July 2007. This contributed to the debate on decoupling, where it was believed that the emerging economies might remain largely insulated from the crisis and provide an alternative engine of growth to the world economy. Effect on Current Account Global Crisis Effect: - The portfolio flows to India (net) turned negative ($ 11.3 bn) due to sale of equity stakes by Foreign Institutional Investors (FIIs) to replenish overseas cash balances. This had knock-on effect on the stock market and the exchange rates through creating a supply-demand imbalance in the foreign exchange market. The Current account deficit grew to 4.1% due to slow down in external demand and deceleration in capital inflows. The NRI deposits (net) had increased from mere $ 0.2 bn to $2.1 bn due to an upward adjustments in interest rate on NRI deposits. The World output decreased by (0.8) % as compared to 3 % growth in last year.

    The after Recession Effect (09-10)


    The Asset price bubble phenomenon As there was strong signs of global recovery. Emerging economies had negative fallout by way of outsized inflows of capital to take advantage of higher returns. But the major fallout of capital inflow was appreciation of domestic currency. The large inflows are more serious for countries with current account deficits, as domestic currency appreciation generally worsens the deficit. The carry trade money has also been flowing into stock markets in emerging economies to take advantage of higher returns Indias merchandise exports, which started falling in October 2008, recorded a decline of 27.0 per cent in H1 (April- September 2009) of 2009 as against a significant increase of 48.1 per cent during the corresponding period of the previous year. Indias net invisibles (invisible receipts minus payments) increased by 18.7 per cent in 200809,led mainly by receipts under private transfers and software services. During 2009-10, the level of foreign exchange reserves increased from US$ 252.0 billion at the end of March 2009 to US$ 283.5 billion at the end of December 2009, mainly on account of valuation gain as the US dollar depreciated against most of the other major international currencies in 2009. In 2009-10, three major developments have taken place in the area of foreign exchange reserves management. 1. Investment of foreign exchange reserves in Infrastructure projects. 2. The second development relates to the IMFs allocation of SDRs to member countries including India. 3. The Purchase of 200 metric tonnes of Gold by RBI. The rupee appreciated against the US dollar by 10.0 per cent during 2009-10 till November 2009. The rupee appreciation was, however, modest at 3.23 per cent against the six-currency trade-weighted NEER during 2009-10 (March to November 2009).

    The after Recession Effect (10-11)


    The current account deficit however, has widened due to robust import demand and lower invisibles surplus. The net invisibles surplus was lower by 8.0 per cent at US$ 39.1 billion during H1 of 201011 as against US$ 42.5 billion during the corresponding period of 2009-10, essentially due to higher invisible payments (which recorded a growth of 33.4 per cent as against a decline of 4.1 per cent a year earlier) The gross capital inflows at US$ 345.7 billion during 2009-10 were 10.2 per cent higher than the US$ 313.6 billion in 2008- 09, while gross capital outflows at US$ 292.3 billion were lower by 4.8 per cent from US$ 306.9 billion in 2008-09. As a result, net capital flows at US$

    53.4 billion (3.8 per cent of GDP) were much higher during 2009-10 as compared to US$ 6.8 billion (0.5 per cent of GDP) in 2008-09. The net private transfers of US$ 52.1 billion in 2009-10 were higher by16.8 per cent from US$ 44.6 billion in 2008-09. The attractive domestic market conditions facilitated net FII inflows of US$ 29.0 billion in 2009-10 (as against net outflow of US$ 15.0 billion in 2008-09).

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