...1) INTRODUCTION India’s development strategy was based on protection, self-reliance & import substitution before the liberalization policy was accepted & initiated. Foreign capital flows were not looked upon favorably & therefore not encouraged. If there is a deficit in the current account it was financed mainly through deft flows & official development assistance. The policy followed was one which discouraged foreign investment. However, the adverse balance of payment & the economic crisis faced by India forced India to adopt economic reforms. Government restrictions can often result in a currency with a low convertibility. For example, a government with low reserves of hard foreign currency often restrict currency convertibility because the government would not be in a position to intervene in the foreign exchange market (i.e. revalue, devalue) to support their own currency if and when necessary. Convertibility is the quality that allows money or other financial instruments to be converted into other liquid stores of value. Convertibility is an important factor in international trade, where instruments valued in different currencies must be exchanged.1 Currency Convertibility means the ability to freely exchange the currency of one Member State into the currency of another Member State. For example, a Barbadian should be able to easily purchase goods in a store in Port of Spain with his Barbadian dollars and receive his change in Trinidad and Tobago...
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...The Indian Rupee Crisis Economics Essay-1 In this paper we are going to examine the cause and the impact of rupee depreciation on the Indian economy. Since last few months Indian rupee came under great stress as overseas investors are paring their exposure to Asia’s third-largest economy amid international uncertainty and mounting worries over the domestic economy. In 2009 – 2010 the exchange rate was hovering around the 43 – 45 rupees per US Dollar level. And now it is around 55 – 56 levels, the main reasons to examine are increase in import bill, higher inflation, fiscal mismanagement and all resulting in higher cost of borrowing. The rupee has lost more than 15% of its value this year, making it one of the worst performing currencies in Asia. This paper reviews the probable reasons for this depreciation of the rupee and the outlook for the same. It also reflects on the policy options to help prevent the depreciation of the Rupee. This paper will firstly discuss about the economy of currency to give an overview of the problem and the factors related to it. Afterwards it will be examining the causes of the Indian rupee depreciation with respect to the Indian economy and the global economy. And after that it will analyse the impact of the same on trade and business. Finally, recommending the policy actions in response of the falling currency. II. LITERATURE REVIEW: These papers include the work which have been used as a basis or reference for formulating the policies regarding...
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...I. HISTORY OF DEVALUATION OF INDIAN RUPEE (INR) AND ITS IMPACTS ON INDIAN ECONOMY In a fixed exchange rate regime the term ‘Devaluation’ is used. It means a deliberate downward adjustment of a country's official exchange rate by its government i.e. central bank (RBI in India) relative to other currencies; Where as in floating or fluctuating exchange rate currency's value is allowed to fluctuate according to the foreign exchange market. In this case, it is known as Depreciation. There are two implications for currency devaluation. * First, Devaluation makes a country's exports relatively less expensive for foreigners and * Second, it makes foreign products relatively more expensive for domestic consumers, discouraging imports. As a result, this may help to reduce a country's trade deficit. Revaluation: This term is used in a fixed exchange rate regime; it means a deliberate upward adjustment to a country's official exchange rate relative to other currencies. In floating exchange rate, it is known as Appreciation. The Liberalized Exchange Rate Management System (LERMS): LERMS was introduced in March 1992 involving the dual exchange rate system in the interim period. The dual exchange rate system was replaced by a unified exchange rate system in March 1993. History of Devaluation The Indian rupee, which was on par with the American...
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...Project Report on Depreciation of Indian Rupee Seminar on Contemporary Issues of Management Submitted To: Submitted by: Ms. Tanya Nagpal Reema Bharti Reg no.10901821 Abstract In this project report on Depreciation of Indian Rupee I have highlighted the different aspects of this problem. The Indian economy is at crossroad today. The Indian rupee had depreciated 20% since January and one of the worst performing currencies in the emerging markets. In this report first of all the different factors upon which a currency’s value is depended are explained such as demand and supply, market sentiments, speculations, debt and fiscal policy, interest rates etc. There are various reasons because of which Indian Rupee depreciated. Major reasons such as volatility in market rates, increase in crude oil prices and its consumption, increased imports, poor management of CAD are playing actively in depreciating Indian rupee. As there are two sides of every coin. There are winners and losers in this case also. Broadly talking that whoever is paying dollar is loser and receiver of dollar is winner. Falling rupee value affected different sectors of economy in different way but if want to take a wide view, it is having negative impact on economy’s every sector. But we should not lose hope. In today’s volatile world...
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...A PAPER On “CONVERTIBILITY OF INDIAN RUPEE” By, Sr. No | Name | PRN | 1 | Mr. Sachin Jadhav | 15020448102 | 2 | Mr. Santosh Ghongade | 15020448103 | 3 | Mr. Rajan Batra | 15020448104 | 4 | Mr. Narayan P.S | 15020448105 | 5 | Mr. Sameep Gadkari | 15020448106 | 6 | Mr. Nandkumar | 15020448015 | 7 | Mr. Bhushan Patil | 15020448027 | 8 | Mr.Vikrant Birje | 15020448056 | Guided By, Prof.S.K.Vaze International Financing TABLE OF CONTENTS Sr. No | Topics | Page No. | 1 | Objectives | 3 | 2 | Foreign Exchange-An Overview | 3 | 3 | Convertibility of Indian Rupee-History | 4 | 4 | Convertibility of Currency-Meaning | 4 | 5 | Current Account Convertibility | 5 | 6 | Capital Account Convertibility * Important Provisions under FEMA | 6,7 | 7 | Convertibility of Indian Rupee-Positive Effects | 9 | 8 | Capital Account Convertibility-Negative Effects | 10 | 9 | Key Points and Analysis | 12 | 10 | Conclusion and Recommendations | 14 | 11 | Bibliography | 15 | Objectives: A. To know Foreign exchange mechanism followed in the past and current practices. B. To understand the concept of “Convertibility of Currency” C. To Study journey of convertibility of Indian rupee pre and post Liberalisation and impact on exchange rate. D. Brief study of Indian laws of regulations and prohibitions in context of the currency convertibility...
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...Int. Fin. Markets, Inst. and Money 29 (2014) 13–32 Contents lists available at ScienceDirect Journal of International Financial Markets, Institutions & Money j o ur na l ho me pa ge : w w w . e l s e v i e r . c o m / l o c a t e / i n t f i n Unbiasedness and risk premiums in the Indian currency futures market Satish Kumar a, Stefan Trück b,∗ a b IBS Hyderabad (a Constituent of ICFAI Foundation for Higher Education), India Macquarie University, Sydney, Australia a r t i c l e i n f o a b s t r a c t This paper explores the relationship between currency futures and realised spot rates for the Indian rupee US dollar exchange rate. Using futures contracts with maturities of one, two and three months, we examine the unbiasedness of futures quotes as a predictor of the future spot exchange rate as well as the nature of time-varying risk premiums in this emerging market. Empirical estimates, obtained using monthly data, suggest the biasedness of futures quotes as a predictor of the future spot rate for contracts with maturities of two and three months. We also find significant time-varying risk premiums in the considered futures market, while the premium is of greater magnitude and more significant with increasing maturity of the contracts. We then examine the relationship between realised risk premiums and explanatory variables such as spot currency returns, the futures basis and realised volatility, skewness and kurtosis of spot currency returns. Our results...
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...Rupee: A Testing Time for India Authorities The currency of a country often reflects its economic, political, geopolitical strength of the country. The currency swings often capture the capital movement and investor appetite in a comprehensive way. With dollar remaining as the major foreign currency for foreign trade and foreign reserve, the developing countries have limited options to control their respective currency. This same was experienced by many developing Asian countries in the recent financial rout. Determination of Exchange Rate and its Fluctuations Like other prices, exchange rate also changes with the changes in the state of market. Just as other prices depend on supply and demand, exchange rate also depends on the configuration of forces of supply and demand. However, two important facets have to be noted: (i) Unlike goods and services, foreign exchange has no direct cost of production. It has only opportunity cost (Walras.1874). Import bills have to be paid through export earnings. So cost of production of exportable surpluses may be taken to constitute the direct production cost of exports and indirect cost of imports (Aggarwal, R. (1981)). Opportunity cost is accounted by with drawl of exportable surplus from domestic consumption. Fluctuations are a natural characteristic of foreign exchange rate market, provided that the exchange rate is not an administered price. If exchange rate is an administered price, it is determined administratively by the central...
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...Introduction…………………………………………………………………………………..3 2. Operational Exposure………………………………………………………………………..9 3. Transaction and Translation Exposure…………………………………………….……..11 4. Other Strategies used by Companies to Hedge Exposure……………………...………19 5. Case Studies: Hedging Strategy used by Companies………………………….………..20 2 INTRODUCTION Foreign exchange exposure represents a material risk for multinational corporations which are unrelated to business operations. One needs to identify each foreign exchange exposure, the risk it represents and methods and costs available to limit such exposure. The value of a firm’s assets, liabilities and operating income changes continuously due to change in factors such as exchange rates, interest rates, inflation etc. In other words, a firm is “exposed” to uncertain changes in a number of variables in its environment. Exposure may therefore be defined as a measure of sensitivity of the value of a financial item to changes in the macro economic variables mentioned above. Risk refers to the variability of the value of the item. FOREIGN EXCHANGE EXPOSURE Foreign Exchange Exposure occurs because of unanticipated change in the exchange rate. For example the difference in the spot rate & one month forward rate is 0.30 rupee per USD and after one month rupee depreciates by 30 paisa there would be no FE exposure but if actual depreciation is more, then exposure would be said to exist. The definition of foreign exchange exposure can be summarized using the following equation:...
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...Management Research Vol.1 Issue 11, November 2012, ISSN 2277 3622 Online available at www.indianresearchjournals.com INDIAN CURRENCY FUTURES: AN ANALYTICAL STUDY OF ITS PERFORMANCE DR. DEVAJIT MAHANTA* * Vice President-Benzcom Consulting Pvt. Ltd. 3A-Oberon Appartement, 6-Lamb Road Ambari, Guwahati-781001, Assam, India ABSTRACT Since its inspection in 2008, currency derivative trade in India had experienced explosive growth, both in volumes and value over the years across all the four currencies contracts that were in operation in INRUSD, INRGBP, INREUR and INRJPY. However in terms of the open interest currency derivatives trade in MCX is more as compared to the NSE. By consider both stock and commodity exchanges for launching currency futures contracts government of India has done a commendable job which is expected to increase the number of quality players, introduce healthy competition and boost trading volumes of Indian currency futures. The global markets (mainly USA) become active only after Indian markets close at 5.00 pm and as a result there is an evident fear about the risks associated with overnight fluctuations in the currency pair. Therefore the functioning as well as the profitability in Indian currency futures is effected by the current performance of the international currency futures market. It is imperative that any evaluation, projection on Indian currency futures market should be undertaken keeping the international market in perspective. KEYWORDS: Currency...
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... the import of crude has gone up from 11.68 million tons (mt) in 1970–1971 to 196 mt in 2007–2008. Oil import bill for India in 2007–2008 was $144.93 billion. With the high demand of oil and other petroleum, and their fluctuating price in the global markets, we are at a very high risk of foreign exchange risk. With so much purchase of energy imports, it might lead to exchange rate movements. And the volatility in the exchange rates (caused by the oil price volatility) may have severe effects on the economy, especially on infrastructural projects and FDI. There have been new studies which are even extending the linkage of the oil rate and exchange rate to the stock markets. Oil is the second largest source of primary commercial energy in India after coal. Share of oil in India’s total energy consumption is 31% (source: EIA). India was under fixed exchange regime till March 1992, where exchange rate of rupee was determined and...
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...Gurlovleen Kaur ABSTRACT Commercial banks form the most important part of Indian financial landscape in terms of their role in channeling credit to the commercial sector and facilitating the process of financial inclusion. In the era of global competition, performance is the key factor for any subject, especially in banking. The Indian banking industry is made up of the Indian public sector banks and private sector banks. In this project an effort has been made to evaluate the financial performance of commercial banks by using key performance indicators as a benchmark, generally the financial performance of bank is evaluated by working out a number of ratios depending upon the data. This study has made use of five financial parameters ,i.e. ,Capital to Risk Weighted Assets Ratio( CRAR) ,Return on Assets ( ROA), Non Performing Asset (NPA),Net interest Margin (NIM), Profit Per Employee( PPE), as these are generally accepted ratios to evaluate the performance of banks ,in order of their performance. Research plan includes decision on data sources, research approaches, research instrument, sampling plan and contact method. The present study is based on secondary data. The data is collected through various journals, studies, websites and publications of banks. The collected data is analyzed to reach at conclusions regarding the various issues related to performance of commercial banks. In this study the 10 commercial banks are selected for design the sample and evaluate their...
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...„Organisational Context of Essar“ “We in the business community have a responsibility to contribute to a better understanding of the urgency of averting a crippling and self-inflicted recession,” writes Lloyd Blankfein, chairman and CEO of Goldman Sachs, in The Wall Street Journal this week. 1 Organisations interact with the world around them. They get influenced by and they influence their surroundings. Over the years those interdependences became stronger; Starbuck states, ‘not only have corporations created social bonds that span national boundaries, but hundreds of corporations are big enough to have memberships in the United Nations.’ He further encourages organisation theory to contribute to human welfare by acknowledging that organisations lie at the heart of major conflicts that are shaping the course of the 21 century and thus providing assistance to organisation in realising the importance of their relations to others and the importance of functioning effectively as part of society. 3 st 2 Starbuck (2003) identifies three grand areas of social conflict in which organisations are participating: - The conflict between corporations and nations, - the conflict between top managers and other stakeholders, and - the conflict between the short run and the long run. Mitigating them should be one of the main purposes of organisation theorists. Therefore it is imminent to identify the different dimensions of organisations and to describe the current and future external...
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...Management Research Vol.1 Issue 11, November 2012, ISSN 2277 3622 Online available at www.indianresearchjournals.com INDIAN CURRENCY FUTURES: AN ANALYTICAL STUDY OF ITS PERFORMANCE DR. DEVAJIT MAHANTA* * Vice President-Benzcom Consulting Pvt. Ltd. 3A-Oberon Appartement, 6-Lamb Road Ambari, Guwahati-781001, Assam, India ABSTRACT Since its inspection in 2008, currency derivative trade in India had experienced explosive growth, both in volumes and value over the years across all the four currencies contracts that were in operation in INRUSD, INRGBP, INREUR and INRJPY. However in terms of the open interest currency derivatives trade in MCX is more as compared to the NSE. By consider both stock and commodity exchanges for launching currency futures contracts government of India has done a commendable job which is expected to increase the number of quality players, introduce healthy competition and boost trading volumes of Indian currency futures. The global markets (mainly USA) become active only after Indian markets close at 5.00 pm and as a result there is an evident fear about the risks associated with overnight fluctuations in the currency pair. Therefore the functioning as well as the profitability in Indian currency futures is effected by the current performance of the international currency futures market. It is imperative that any evaluation, projection on Indian currency futures market should be undertaken keeping the international market in perspective. KEYWORDS: Currency...
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...A STUDY ON FOREIGN EXCHAGE AND ITS RISK MANAGEMENT Project submitted in partial fulfillment for the award of Degree of MASTER OF BUSINESS ADMINISTRATION DECLARATION I hereby declare that this Project Report titled “A STUDY ON FOREIGN EXCHANGE AND ITS RISK MANAGEMENT” submitted by me to the Department “XXXXX” is a bonafide work under taken by me and it is not submitted to any other University or Institution for the award of any degree diploma / certificate or published any time before. Name and Address of the Student Signature of the Student Date ACKNOWLEDGEMENT I express my profound gratitude to XXXX, Faculty M.B.A for his guidance and support all through the completion of the project. I also express my hurtful thanks to XXXXX for providing valuable suggestions in completions of the project. I take this opportunity to acknowledge unreserved support extended to me by the Project and Training team of HCL TECHNOLOGIES. I am very much indebted to the dedicated and experienced staff of MBA. It is indeed a pleasant task and small effort to thank all the people especially some of my friends who have contributed towards the successful completion of this project work. Finally, I would like to express my gratitude to my parents for their endearing support and cooperation which has made me complete this project fruitfully. SUMMARY A Multinational company...
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...Case Study Questions - Indian BPOs - Waking up to the Philippines Opportunity? 1) How has the global economic downturn, discussed in the opening profile and throughout this chapter, impacted jobs outsourcing in the BPO industry? Global economic downturn negatively impacted jobs outsourcing in the BPO industry. In the beginning, there were jobs starting from customer care, medical transcription, medical billing, and payroll management to tax processing. With the strength of the rupee and the weakening dollar, the industry was starting to feel the pressure. They also faced issues like poor infrastructure, high spending on transporting people, and no incentive of low taxes. BPO was less willing to expand their industry to other countries and offer new jobs to new employees. 2) How has the global economic downturn, discussed in the opening profile and throughout this chapter, impacted jobs outsourcing in the BPO industry? Global economic downturn negatively impacted jobs outsourcing in the BPO industry. In the beginning, there were jobs starting from customer care, medical transcription, medical billing, and payroll management to tax processing. With the strength of the rupee and the weakening dollar, the industry was starting to feel the pressure. They also faced issues like poor infrastructure, high spending on transporting people, and no incentive of low taxes. BPO was less willing to expand their industry to other countries and offer new jobs to new employees. ...
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