Chapter 23

External Sector—BoP,
Currency Convertibility,
ADR-GDRs and FEMA

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 Learning Objectives

● Explain the meaning of Balance of Payment and

Capital Account Convertibility
● Distinguish between ADRs and GDRs
● Understand the changes in FEMA, over FERA
● Analyse the recent policy changes in the external
sector

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 External Sectors

● Balance of Payment
● Currency Convertibility
● ADRs and GDRs
● FEMA

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Balance of Payment and Currency Convertibility

 Currency Convertibility
 Capital Account and Current Account
 Capital Account (Direct, Portfolio Investment,
Other Capital Flows)
 Approaches to Capital Account Convertibility
 3 Approaches
 Advantages and Disadvantages of full convertibility

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 ADR and GDR

● Depository Receipts
● ADR, GDR
● Issue Structure
● Listing of GDRs/ADRs
● Reasons for Listing
● Comparison between ADR and GDR

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 Foreign Exchange Management Act (FEMA) - 1999

● Distinction between FERA and FEMA

● From FERA to FEMA

● Recent Policy Charges

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