Foreign Capital Inflow

Concern for Economy: The unexpected increase in inflation will leads the exports to be more expensive than other countries. Then the exports will decline.

Our exports have almost doubled during the last four years. The foreign exchange reserves have crossed US $ 200 billion which have given India a great financial strength. Our rupee has become very strong against the other international currencies- notably dollar, pound and euro.

By saying that this country has a high rate of inflation, that means people who live in this country are sad. Inflation has many definitions, but most of these definitions are related to one concept which is inflation is a general increase in prices and fall in the purchasing value of money. There is no doubt about that inflation is an important key concept in economics. As we know that there is something called deflation which is the opposite meaning of inflation. In this paper, I will write about inflation in general, the causes and effects of inflation, I will bring some countries in order to compare them, and I will mention some strategies which would help us in case we have a high rate of inflation. Most of the people are worry from having an inflation, and this is a true feeling. However, inflation could be a good thing for the economics, if it is a low rate. In fact, inflation in the whole world has been increasing, so the prices have been increasing and the value of money has been decreasing. For instance, according to Investopedia website, “During World War II, you could buy a loaf of bread for $0.15, a new car for less than $1,000 and an average house for around $5,000. In the twenty-first century, bread, cars, houses and just about everything else cost more. A lot more. Clearly, we 've experienced a significant amount of inflation over the last 60 years.” Investopedia staff said. On the other hand, throughout the history, it is something rare when a country has

According to the case study, “experts” are attributing this strong inflationary force to a variety of factors: high fiscal deficit, populist policies that are creating demand, poor supply response in agriculture that is due to lack of investment, and the poor investment climate arising from the lack of reforms and a series of political scandals, among others.

Inflation is present in India from a long period of time however except the year 1956 the inflation always remained in control i.e. about 10%. In 1960’s we faced a hard inflation due to various wars. However in 1970’s due to high prices of oil led to high inflation but emergency brought things in control. However in 1980’s apart from 1981 when the inflation was about 18% after lifting the emergency, there was soft and gentle inflation because the rules were made liberal. In 1990’s the inflation rose again but liberalization helped to maintain inflation in single digits only. In 2000’s, 2008 saw a great deal of inflation where the inflation rate went into double digits.

The current account is one of the components of the Balance of Payment together with the capital and financial account and the reserve assets account. This represents the difference between a country’s savings and its investment and it is defined as the sum of the payments of goods and services bought from foreigners, net income from abroad and net current transfers. When the current account is in deficit, it means that the country’s net sales abroad value is negative, while it is in surplus when this value is positive. The current account must balance, so surplus of one nation means deficits of another.

It should be clear that India 's economic policies are designed to attract significant capital inflows into India on a sustained basis to encourage technology collaboration agreements between India and foreign firms. Policy initiatives taken over the past few years have resulted in a significant investment in all areas of the economy, except those reserved for the public sector.

Reserve assets are instruments available with government authorities for financing or regulating payment imbalances, it comprises of monetary gold, special drawing rights (SDRs) and foreign exchange. Central bank and treasuries use this instrument in financing the deficit. The reserves are also the balancing figure of the balance of payment account. If sufficient reserves are not available, a country needs to borrow money from institutions like the World Bank and International Monetary Fund (IMF).

Figure 1 shows the net inflow of FDI into the developing countries. There is a fall into the amount of FDI going to the developing countries from late 1980 to early 1990 and in the late 2000. Overall, there is an upward trend of amount of FDI going to the developing countries. The same trend with ODA shown in Figure 2. The amount of Net ODA received by developing countries from 1990 to mid-1990 is fluctuating then continued to fall until 2000. From year 2000 onwards, there is a steady increase of ODA received by the low-income countries. Compared with FDI and Net ODA, personal remittances has a steady upward trend (shown in Figure 3), noting a huge increase in 2008 of US$4.5 billion from US$15.2 billion in 2007. With the

In this 21st century, we live in a time like no other. The world has transformed as a result of globalization. Globalization has made it possible for individuals who wake up in east, to end their day in the other part of the world. Nations came together and eliminated trade barriers, which enabled Corporation’s to begin foreign direct investment (FDI) in other nations. This resulted, corporations transform into Multinational Enterprises. The movie “The Grand Seduction” shows the powerful impact FDI’s can have for an economy. This essay will analyze the movie and the following statement “The attraction and retention of foreign direct investment (FDI) is a complex and multifaceted activity for a number of different stakeholders”. This essay

After opening of the trade barriers in 1991, the foreign investment inflows have increased enormously. Foreign capital, which actually plays an important role in increasing productivity of labor and accumulation of foreign reserve in developing countries to meet the current account deficit , is consist of foreign direct investment (FDI) and foreign portfolio investment(FPI). Both have worked as an instrument of global economic integration and stimulation. Apart of providing access to the foreign capital FDI also offers modern era technology, tools of creativity, desired skill sets and other complementary skills. In addition of producing additional economic activity and generating employment, foreign investment facilitates in flow of sophisticated technology.

Inflation is general defined as the devaluation of the currency with the comprehensive and continued rising price level, which means the purchase of money is persistent declining (James and Charles 1975). And this is generally considered as the result of the amount of money in circulation more than the actual needs of the economy. It will directly leads to the devaluation of paper money. If the income of residents do not change, then the living standard of citizens will dropped, which might result in the social and economic disorder and can negatively impact the development of the economy. However, within a certain period of time, moderate inflation can stimulate consumption, expand domestic demand and promote economic development (Trevithick and Mulvey 1996). For example, sometimes the government borrow money from the central bank to expand financial investment and take measures to ensure that the private sector investment is not reduced, which promote economic growth as a result of the increase in total investment. Another case is for producers that the speed of product prize rising is always faster than the that of the nominal wage, so the profit of the enterprise in the short term will increase, and the enterprise will expand investment, as a result, have an positive effect on the economy.

The research paper is a brief study that explains the different factors that play a key role in growth international financial market in India. We also took a brief look at what the RBI (Reserve Bank of India) and their role in the growth of India’s economy.

India is rich in natural resources and manpower and has made significant economic progress since attaining independence in 1947. India's economy encompasses traditional village farming, forestry, fishing, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of support services.

The Indian economy had left behind the low-growth track of the early 1980s, following the bold economic reforms initiated in 1991-93. India began to appear as a significant player in the global economy. India’s exports began to climb, its foreign exchange reserves, which for decades had hovered around 5 billion dollars, rose exponentially after the economic reforms and in little more than a decade had risen to 300 billion dollars. Indian corporations that rarely ventured out of India