4/28/12

Economic Environment

Domestic or International Economic Environment is governed by certain Laws, Policies and Standards.

4/28/12 Policy .

4/28/12 .

4/28/12 Exim Policy Definition  It’s a policy in the sphere of Foreign trade highlighting strategic measures to be taken for next 5 years to improve overall import & export (specifically export promotion) environment and policies and procedure needed for the same. History of Exim Policy:  Trade Policy Reforms have been one of the major .

increasing transparency by simplifying the processes involved in the export sector and moving away from quantitative restrictions. Promotion has been and continues to be a major thrust of India’s trade policy policies have been aimed at creating a friendly environment by removing redundant procedures.4/28/12 Exim Policy Objective of Exim Policy:  Trade Reforms form the crux of the economic reforms in India. thereby improving the competitiveness of Indian industry  Export  Accordingly. .

e.4/28/12 Exim Policy  It contains policies in the sphere of Foreign trade i. the country’s transition to a globally oriented vibrant economy with a view to derive maximum benefits from expanding global market opportunities. policies and procedure related there to. sustained economic growth Objective of Exim Policy:  Accelerating  Stimulating . with respect to import & export from the country and more especially export promotion measures.

4/28/12 Standard .

.4/28/12 Balance of Payments (BOP)  BOP is a statistical record of a country’s transaction with the rest of world of BOP: Strength of Currency: Detailed Information concerning the demand and supply of countries currency Potential Business Partner: Signals the potential of a country as a business partner for the rest of the world Performance Evaluation: Evaluation of county performance in international  Significance a. b. c.

Financial Claims. and Real assets Entries: Purchase of foreign of  Debit . Goodwill. Services.4/28/12 BOP Accounting  Double-Entry  India Book Keeping IMF follows BPM6 standards given by  BOP recorded over a Quarter (India) in a single currency (domestic  Prepared currency  Credit Entries: Sales of Goods.

c. Current Account Capital Account Financial Account .4/28/12 BOP Accounts  Country’s International Transaction can be grouped into three categories: a. b.

. capital transfer etc.4/28/12 Capital Account.Overview  It includes all the purchases and sales of non financial assets like real estate. debt forgiveness.

4/28/12 Financial Account Overview  It Includes Investment in securities. Reserve assets. . loans. Trade credits and advances.

4/28/12 Current Account  It includes the export and import of goods and services. .

b. Balance: The trade balance is the difference between exports and imports (in monetary value) Broad Categories: Merchandise Trade Services  Trade  Four a. .4/28/12 Current Account  Current Account Deficit implies Reduction in “Net Foreign Wealth” similarly Current Account Surplus implies increase in Net Foreign Wealth.

oil. computer etc.  . automobiles. but not trade in services. Visible Trade Balance: The visible trade balance is that part of the trade balance that refers trade in tangible goods. wheat. clothes.4/28/12 Current Account-Merchandise Trade  It includes exports and imports of tangible goods like.

Invisible Trade Balance: The invisible trade balance is that part of the trade balance that refers to services and other products that do not result in the transfer of physical objects.4/28/12 Current Account-Services  It includes nontangible payment and receipt for legal.  . and tourist expenditures. insurance premiums. shipping fees. royalty for patents and intellectual properties. consulting and engineering services.

and other income on foreign investment.4/28/12 Current Account-Factor Income  It consist of payments and receipts of interest. . dividend.

  . official and private grants. unilateral transfers are regarded as an act of buying goodwill from recipients. To regard double-entry bookkeeping rule.4/28/12 Current Account-Unilateral transfer  It includes foreign aid. It’s a one directional flow without offsetting flow. and gifts. reparations.

on Nature and Objectives of Economic Policies  www.wikipedia.4/28/12 References  International Financial Management by Cheol and Bruce Presentation by Astha et al.com  .

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