monetary policy of reserve bank of india,bop,foreign exchane

8/12/2019 Monetary Policy of Reserve Bank of India,Bop,Foreign Exchane

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MONETARY POLICY OF RESERVE BANK OF INDIA

Q.1: Define Monetar Po!i". Di#"$## t%e o&'e"ti(e# of RBI)# Monetar *o!i".OR

+rite note on o&'e"ti(e# of RBI)# Monetar Po!i".An#.A, MONETARY POLICY :-

Monetary policy is a regulatory policy by which the central bank or monetary authority of a country controlsthe supply of money, availability of bank credit and cost of money, that is, the rate of Interest.Monetary policy / monetary management is regarded as an important tool of economic management inIndia. RBI controls the supply of money and bank credit. The entral bank has the duty to see that legitimatecredit re!uirements are met and at the same credit is not used for unproductive and speculative purposes.RBI rightly calls its credit policy as one of controlled e"pansion. B,OBECTIVES OF MONETARY POLICY OF INDIA :-The main ob#ective of monetary policy in India is $growth with stability%. Monetary Management regulatesavailability, cost and use of money and credit. It also brings institutional changes in the financial sector of theeconomy. &ollowing are the main ob#ectives of monetary policy in India '(1. /ro0t% +it% Sta&i!it :-Traditionally, RBI%s monetary policy was focused on controlling inflation through contraction of money supplyand credit. This resulted in poor growth performance. Thus, RBI have now adopted the policy of $)rowthwith *tability%. This means sufficient credit will be available for growing needs of different sectors of economyand at the same time, inflation will be controlled with in a certain limit.

. Re2$!ation3 S$*er(i#ion An4 De(e!o*5ent Of Finan"ia! Sta&i!it :-&inancial stability means the ability of the economy to absorb shocks and maintain confidence in financialsystem. Threats to financial stability can come from internal and e"ternal shocks. *uch shocks candestabili+e the country%s financial system. Thus, greater importance is being given to RBI%s role inmaintaining confidence in financial system through proper regulation and controls, without sacrificing theob#ective of growth. Therefore, RBI is focusing on regulation, supervision and development of financialsystem.6. Pro5otin2 Priorit Se"tor :-riority sector includes agriculture, e"port and small scale enterprises and weaker section of population. RBIwith the help of bank provides timely and ade!uately credit at affordable cost of weaker sections and lowincome groups. RBI, along with -BR, is focusing on microfinance through the promotion of *elf 0elpgroups and other institutions.7. /eneration Of E5*!o5ent :-Monetary policy helps in employment generation by influencing the rate of investment and allocation ofinvestment among various economic activities of different labour Intensities.

8. E9terna! Sta&i!it :-1ith the growth of imports and e"ports India%s linkages with global economy are getting stronger. 2arlier,RBI controlled foreign e"change market by determining ea"change rate. -ow, RBI has only indirect controlover e"ternal stability through the mechanism of $managed &le"ibility%, where it influences e"change rate bybuying and selling foreign currencies in open market.. En"o$ra2in2 Sa(in2# An4 In(e#t5ent# :-RBI by offering attractive interest rates encourage savings in the economy. high rate of saving promotesinvestment. Thus the monetary management by influencing rates of interest can influence savingmobili+ation in the country.;. Re4i#tri&$tion Of in"o5e An4 +ea!t% :-By control of inflation and deployment of credit to weaker sectors of society the monetary policy mayredistribute income and wealth favouring to weaker sections.RBI, :-The Reserve Bank of India is the central bank of India it was established as a shareholder%s bank on 7 stpril789:. Its share capital was Rs. : crore, divided in to : lakhs fully paid up shares of Rs. 7;; each. 8 it was nationali+ed. Its head!uarters is at Mumbai. RBI, like any other bank performs almostall traditional entral banking functions. ue to country%s development it has also undertaken developmentaland promotional functions.. F?NCTIONS OF RBI :-RBI performs many functions, some of them are'(


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7. I##$e Of C$rren" Note# :-6nder section ?? of RBI ct, the bank has the sole right to issue currency notes of all denominations e"ceptone rupee coins and notes. The one(rupee notes and coins and small coins are issued by entral)overnment and their distribution is undertaken by RBI as the agent of the government. The RBI has aseparate issue department which is entrusted with the issue of currency notes.. Ban@er To T%e /o(ern5ent :-The RBI acts as a banker agent and adviser to the government. It has obligation to transact the banking

business of entral )overnment as well as *tate )overnments. 2.g.'( RBI receives and makes all paymentson behalf of government, remits its funds, buys and sells foreign currencies for it and gives it advice on allbanking matters. RBI helps the )overnment 3 both entral and state 3 to float new loans and managepublic debt. The bank makes ways and meets advances of the government.


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speculative purposes RBI has various weapons of monetary control and by using them, it hopes to achieve

its monetary policy.

I, )eneral Iuantitative redit ontrol Methods '(

In India, the legal framework of RBI%s control over the credit structure has been provided

6nder Reserve Bank of India ct, 789> and the Banking Regulationct, 78>8. uantitative credit controls

are used to maintain proper !uantity of credit o money supply in market. *ome of the important general

credit control methods are'(

1. Bank Rate olicy '(

Bank rate is the rate at which the entral bank lends money to the commercial banks for their li!uidity

re!uirements. Bank rate is also called discount rate. In other words bank rate is the rate at which the central

bank rediscounts eligible papers 4like approved securities, bills of e"change, commercial papers etc5 held by

commercial banks.

Bank rate is important because its is the pace setter to other marketrates of

interest. Bank rates have been changed several times by RBI to control inflation

and recession. By ?;;9, the bank rate has been reduced to EF p.a.

?.


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credit by increasing the repo and reverse repo rates and by decreasing them it e"pands credit. Repo rate

was E.A:F in March ?;77 and Reverse repo rate was :.A:F for the same period.


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In post(reform period the RR and *DR have been progressively lowered. This has been done as a part of

financial sector reforms. s a result, more bank funds have been released for lending. This has led to the

growth of economy.

>5 eregulation government phased out the use of adhoc treasury Bills.These bills were used by government to

borrow from RBI to finance fiscal deficit. 1ith phasing out of Bills, RBI would no longer lend to government

to meet fiscal deficit.

E5 Di!uidity d#ustment &acility 4D&5'(

D& allows banks to borrow money through repurchase agreement D& was introduced by RBI during =une,

?;;;, in phases. The funds under D& are used by banks to meet day(to(day mismatches in li!uidity.

A5 rovision


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>5 1hen capital inflows are converted into rupees, they get in#ected into the economy thereby, increasing

the money supply.

*o to maintain price stability RBI has to mange the e"change rate and Interest rate.

B5 RBI%* M2*6R2* & the impact of large capital inflows was managed through day(to(day D& and


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RBI has developed various methods to maintain stability in interest rate and e"change rate like D&, . daptability'(

In India monetary policy is fle"ible, as it changes with time. RBI has developed new methods of credit control

and shifted from monetary targeting to multiple indicator approach.

:. Increase In )rowth'(

To maintain the growth of economy RBI has used its instruments effectively. t present India has the

second highest rate of ) growth after hina. Thus monetary policy has played an important role.

E. Increase In Bank eposits'(

The increase in bank deposits over the years indicates trust and confidence of people in banking sector.2ffective supervision of RBI over banks and financial institutions is largely responsible for trust andconfidence of public in banking sector.

A. ompetition mong Banks '(

The monetary policy of RBI has resulted in healthy competition among banks in the country. The competition

is due to deregulation of interest rates and other measures taken by RBI. -ow(a(days due to

professionalism banks provide better service to customers.

II. &ID6R2* I DIMITTI


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t present time, the goals of monetary policy in India, are not set out in specific terms and there is

insufficient freedom in the use of instruments. In such a setting, accountability tends to be weak as there is

lack of clarity in the responsibility of governments and RBI.

E. Black Money '(

There is a growing presence of black money in the economy. Black money falls beyond the purview of

banking control of RBI. It means large proposition of total money *upply in a country remains outside the

purview of RBIs monetary management.

A. Increase Holatility '(

The integration of domestic and foreign e"change markets could lead to increased volatility in the domestic

market as the impact of e"ogenous factors could be transmitted to domestic market. The widening of foreign

e"change market and development of rupee ( foreign e"change swap would reduce risks and volatility.

G. Dack


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?. 2"port of services.

9. Interest, profit and dividends

received.

7. 6nilateral receipts.

Import of services. Interest, profit and dividends paid.

urrent ccount Balance 47 to >5

8. &oreign investments.

. *hort term borrowings.

;. Medium and long term borrowing.

Investments abroad.

*hort term lending.

apital ccount Balance 4: to A5

6* L billion.

9. apital ccount Balance '(

It is the difference between receipts and payments on account of capital account. The transactions under

this title involves inflows and outflows relating to investments, short term borrowings I lending, and medium

term to long term borrowings / lending. There can be surplus or deficit in capital account. 1hen credits are


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more than debits surplus will take place and when debits are more than credits deficit will take place. In

?;;8(7;. India%s capital account surplus was :7.G 6* L billion.

>. 2rrors and 6* L billion.

.?. 1rite note on India%s Balance of Trade

-*. . I-I%* BD-2


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Indian e"porters lack -egotiation *kills due to poor training in Marketing. They fail to onvince N induce the

foreign buyers to place orders.

>. Inade!uate romotion '(

&or 2"port Marketing, romotion is important. Many Indian 2"porters do not give much importance to

promotion. good no. of Indian e"porters are not professional in advertising N *ales promotion. They do not

take part in trade fairs N e"hibitions.

:. oor follow(up of sales '(

Indian e"porters are ineffective in providing after(sale(service. They do not bother to find out the reactions of

buyers after sale. This results in poor performance of India%s e"port trade.

II. )eneral auses

7. )ood omestic Market

*ellers find a ready market for their goods within the country, so they do not take patns to get orders from

overseas markets.

?. -umber of formalities

There are number of documentation N other formalities due to which the some rnarketers do not enter the

e"port field. *o there is a need to simplify formalities.9. roblem of Trading Blocs

Trading blocs reduce trade barriers on member nations, but they impose trade barriers on non(members. s

India is not a member of some powerful trading blocs, it has to face some problems.

>. -egative ttitude

*ome of the overseas buyers have a negative attitude towards Indian goods. They feel that Indian goods

are inferior goods. Thus there is a need to correct this attitude.

:. oor Infrastructure

Indian infrastructure is poor. Indian e"porters find it difficult to get orders N also to deliver them at time.

. 9 ' 1hat are the Types of B


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*tructural dise!uilibrium is caused by structural changes in the economy affecting demand and supply

relations in commodity and factor markets. *ome of the structural dise!uilibrium are as follows '(

a. shift in demand due to changes in tastes, fashions, income etc. would

decrease or increase the demand for imported goods thereby causing a

dise!uilibrium in B


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8. Monetar Di#e2$i!i&ri$5

Monetary dise!uilibrium takes place on account of inflation or deflation. ue to inflation, prices of products in

domestic market rises, which makes e"ports e"pensive. *uch a situation may affect B


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n increase in income coupled with awareness of higher living standard of foreigners,

induce people at home to imitate the foreigners. Thus, when people become victims of demonstration effect,

their propensity to import increases.

II. E9*ort Re!ate4 Ca$#e# :-

2ven though e"port earnings have increased but they have not been sufficient enough to meet the risingimports. 2"ports may reduce without a corresponding decline in imports. &ollowing are the causes fordecrease in e"ports1. In"rea#e In Po*$!ation'(

)oods which were earlier e"ported may be consumed by rising population. This reducesthe e"port earnings of the country leading to B


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The e"istence of political instability may result in disrupting the productive apparatus of the country causing

a decline in e"ports and increase in imports. Dikewise, payment of war e"penses may also serious affect

dise!uilibrium in the country%s B


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To restrict imports the government may also impose additional tariffs or customs duties which may improve

the B


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as Ta" holiday, ash *ubsidy, ssistance in Research N evelopment, roviding technical assistance,

roviding *carce inputs etc.

A. CONCL?SION :-

&rom the above measures it is clear that more e"ports with import substitution based on economic strength

of the country are the real effective solutions to correct the dise!uilibrium in the balance of payments.

EMER/IN/ TRENDS IN INDIA)S BOP POSITION SINCE 11

.7' 2"plain the emerging trends in India%s B


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Trade balance is a difference between e"port earnings and import payments. In India, trade deficit is mostlynegative. In 788;(87, trade deficit was over 8 6* L billion which increased to over 77G.> 6* L billion in?;;8(7;. There was negative growth in e"ports, due to recession in world markets on account of sub(primecrisis of 6*.

, Invisibles 4net5 '(

The net invisibles include the difference between receipts and payments on account of -on(factor services

4insurance, transport, travel etc.5, Income 4Interest, profit, dividend5, private transfers and official transfers. In788;(87, the net invisibles were negative to the e"tent of about ;.9 6* L billion. In ?;;8(7;, the netinvisibles were positive to the e"tent of over G; 6* L billion.

6, urrent ccount Balance '(

It is the difference between the receipts and payments on current account which includes trade balance. InIndia the current account balance is mostly negative due to huge trade deficit. In 788;(87, the currentaccount deficit was 8.A 6* L billion, which increased to 9G.> 6* L billion in ?;;8(7;.

7, apital ccount Balance '(

It is the difference between the receipts and payments on capital account. In India, the capital accountalways showed a surplus mainly due to inflow of foreign investments in India and net borrowings. In 788;(87, the capital account showed a surplus of G.> 6* L billion, which increased to about :? 6* L billion in?;;8(7;.

8, &oreign 2"change Reserves '( negative foreign e"change reserve position shows a weak economy and a positive balance shows

comfortable position of the country. In 788;(87, the foreign e"change reserves were reduced by 7.9 6* L

billion. In ?;;8(7;, the foreign e"change reserves increased by 79.> 6* L billion.

. ?' 2"plain the reasons for satisfactory performance of B


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rivate transfers include inward remittances from Indian workers working abroad, personal gifts received

from abroad, donations received from abroad by religious / charitable trusts etc. rivate transfers were about

?.7 6* L billion in 788;(87. It increased to 7?.G 6* L billion in ?;;;(;7. 1hich further increased to >>.E 6*

L billion.

8, Increase In *ervice 2"ports

t present, India ranks 8th in the world for overall services e"ports and ?nd in the world for computer and

information services e"ports. In ?;;;(;7 India%s services e"ports have increased from 7E.9 6* L billion to 8E

6* L billion in ?;;8(7;.

The invisibles 4net5 on B


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7, -on ( Resident eposits '(

-on ( Resident deposits are also obtained at high rates of interest. *uch deposits are highly volatile in

nature as, their main ob#ective is to ma"imise returns. If conditions are unfavourable, they can withdraw their

funds from the country. Thus, both foreign institutional investors and non(residents are fair weather friends.

1e cannot rely upon them at times of crisis.

8, 2arnings &rom Invisibles '(

2arnings from invisibles have played an important role in reducing the current account deficit in balance of

payments all through 788;%s. It vcovered the entire trade deficit in the year ?;;7(;?. The prospects of

invisibles in future looks bright for India.

, Merchandise Trade '(

The lasting solution to B


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telegraphic transfers, bank drafts and foreign bills. Telegraphic transfer is the !uickest method of transferring

the purchasing power.

. redit &unction

The foreign e"change market also provides credit to both national and international, to

promote foreign trade. It is necessary as sometimes, the international payments get delayed for E; days or

8; days.


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&rom the above sources demand and supply generate which in turn helps to determine

the foreign e"change rate.

B. TC2*


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4Bid5 Buy Rate 7 6* L V >:.:;

4sk5 *ell Rate 7 6* L V >:.A:

The bank is ready to buy 7 6* L at Rs. >:.:; and sell at Rs. >:,A:. The difference of

Rs.;.?: is the profit margin of dealer.

, For0ar4 E9"%an2e Rate

0ere foreign e"change is bought or sold for future delivery i.e., for the period of 9;, E; or

8; days' There are transactions for 7G; and 9E; days also. Thus, forward market deals in contract for future

delivery. The price for such transactions is fi"ed at the time of contract, it is called a forward rate.

&orward e"change rate differs from spot e"change rate as the former may either be at a

premium or discount. If the forward rate is above the present spot rate, the foreign e"change rate is said to

be at a premium. If the forward rate is below the present spot rate, the foreign e"change rate is said to be at

a discount. Thus foreign e"change rate may be at forward premium or at forward discount.

&or 2g. an Indian importer may enter into an agreement to purchase 6* L 7;,;;; si"ty

days from today at 7 6* L Rs. >G. -o amount is paid at the time of agreement, e"cept for usual security

margin money of about 7;F of the total amount. E; days form today, the importer will get 7;,;;; 6* L in

e"change for Rs. >,G;,;;; irrespective of the *pot e"change rate prevailing on that date.

a, Fa"tor# Inf!$en"in2 For0ar4 E9"%an2e Rate

i, Interest rates.

ii, egree of speculation in foreign e"change market.

iii, Inflation rate.

i(, &oreign investor%s confidence in domestic country.

(, 2conomic situation in the country.

(i, olitical situation in the country.

(ii, Balance of payments position etc.

&, Nee4 For For0ar4 E9"%an2e Rate Contra"t#

To overcome the possible risk of loss due to fluctuations in e"change rate, e"porters,

importers and investors in other countries mayenter in forward e"change rate contracts.

In floating or fle"ible e"change rate system the possibility of wide fluctuation in e"changeis more. Thus, both e"porters and importers safeguard their position through a forward arrangement. Byentering into such an arrangement both parties minimi+e their loss.

Q. > '+rite note on Ar&itra2e. < R

+rite note on Intere#t rate an4 Ar&itra2e.

ns. . RBITR)2

rbitrage is the act of simultaneously buying a currency in one market and selling

it in another to make a profit by taking advantage of e"change rate differences in two markets. If the

arbitrages are confined to two markets only it is said Jtwo(pointK arbitrage. If they e"tend to three or more

markets they are known as Jthree(pointK or Jmulti(pointK arbitrage. Those who deal with arbitrage are called

arbitrageurs.

*pot sale of a currency when combined with a forward repurchase in a single

transaction is called Jurrency *wapP. The *wap rate is the difference between spot and forward e"change

rates in currency swap.


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rbitrage opportunities may e"ist in a foreign e"change market.. *uppose the rate of

e"change is 7 6* L V. :; in 6* market and 7 6* L V. :: in Indian Markets, then an arbitrageur can buy

dollars in 6* market and sell it in Indian market and get a profit of V. : per dollar..

In today%s modern well connected and advanced markets, arbitrageurs 4which are mainly

banks5 can spot it !uickly and e"ploit the opportunity. *uch opportunities vanish over a period of time and

e!uilibrium is again maintained.

&or 2g.

Bank V / L :;.:; / :;.::

Bank B V / L :;.>; / :;.>:

The above rates are very close. The arbitrageur may take advantage and he can purchase L 7,;;,;;; from

Bank B at V. :;.>: / a dollar and sell to it to Bank at V. :;.:;, thus making a profit of ;.;:. The total profit

would be 47,;;,;;; " ;.;:5 V. :,;;;. The profit is earned without any risk and blocking of capital.

B. ARBITRA/E.AND INTEREST RATE

Interest arbitrage refers to differences in interest rates in domestic market and in overseas

markets. If interest rates are higher in overseas market than in domestic market, an investor may invest in

overseas market to take the advantage of interest differential.

Interest arbitrage may be covered and uncovered.

1, ?n"o(ere4 Ar&itra2e

In this system, arbitrageurs would take a risk to earn profit by investing in a high interest

bearing risk free securities in a foreign market. 0is earnings would be according to his calculations if the

currency of foreign market where he invested does not depreciate. If depreciation is e!ual to the difference

in interest rate, the investor would not incur loss. 0owever, if depreciation is more than interest rate, then the

arbitrageur will incur loss.

&or 2g. In -ew Cork interest rate on E month Treasury Bill is EF and in *pain it is GF. n

6* investor may convert 6* dollars in 26R< and invest in *pain, thereby taking an advantage of Q?F

interest rate. -ow when bill matures, 6* investor will convert 26R< into dollars. 0owever, by that time

26R< may have depreciated the 6* investor will get less dollars per 26R


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The covered interest arbitrage refers to spot purchase of foreign currency to make investment and offsetting

simultaneous forward sale of foreign currency to cover foreign e"change risk. 1hen treasury bills mature,

the investor will get the domestic currency e!uivalent of foreign investment plus interest without a foreign

e"change risk.CAPTER 1; - DETERMINATION OF EJCAN/E RATE

. 7 ' 1hat is e"change rate 0ow is it determined

ns. 5 2@0-)2 RT22"change rate refers to the rate at which a country%s currencies are e"changed for currencies of othercountry. In other words it is the price of one currency in terms of another currency. &or 2g. If the value of 76* dollar in Indian rupees is >: then the e"change rate is 7 6* L V >:. Thus foreign e"change rateindicates the e"ternal value of a country%s currency. It also shows the purchasing power of a country%scurrency in terms of currency of another country.


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B. 2"ports ; L 7.

&ormula

Rate ofE9"%an2eInterna! P$r"%a#in2 Po0er in


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In4iaInterna! P$r"%a#in2 Po0er in?.S.

R;

*ymbolically,

1here '(

R Rate of e"change of domestic currency in relation to foreign currency.

rices of certain goods in domestic currency

o rices of same goods in foreign currency.

ccording to absolute , a rise in domestic price level in relation to foreign price level will lead to

proportional depreciation of domestic currency against foreign currency. &or 2g. If the price of basket of

goods in India increases to V. >,?:;, while the price of basket in 6* remains same, then the new e"change

rate will be

R >?:; >?.: V

7;;

In the above case, the Indian V depreciates N 6* L appreciates.

?. Relative Hersion ; " 9;; E; 4Rs E;76* L5. ?;;

(>. ritically evaluate the urchasing ower arity Theory.


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The urchasing ower arity theory has following drawbacks

7. Ignores )overnment Intervention

The theory does not consider )overnment or entral Bank intervention in e"change rate

determination. If domestic currency depreciates or appreciates too much, the central bank intervenes as it

can have adverse effects on economy. -ormally, under managed float, the central bank intervenes in

e"change rate.

?. Ignores uality


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Though theory is sub#ect to various limitations, yet it has relevance in long(term.

+ORLD TRADE OR/ANISATION

.7 ' iscuss the ob#ectives and functions of 1T


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1T< shall provide the forum of negotiations among its members concerning their multilateral trade relations.

95 *ettlement 5 ssistance To IM& nd IBR

1T< shall co(operate with IM&, IBR and its affiliated agencies to achieve greater coherence in global

economic policy.

:5 dministration 5, plus a number of other agreements, entered into after 6ruguay Round.

E5 2"amination


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Trade Related Intellectual roperty Rights 4TRIs5 pertain to atents and opyrights. 1hereas earlier on

process patents were granted to food, medicines, drugs and chemical products, the TRIs greement now

provides for granting product patents also in all these areas. rotection will be available for ?; years for

patents and :; years for copyrights.

E5 )eneral greement A, vi+, pre(shipment inspection, rules of origin, import licensing,anti ( dumping measures and countervailing duties, safeguards, subsidies etc.

.9' 2"plain TRIs greement and implication of TRIs greement

of 1T< on member nations. TRIP#, :-

Intellectual property Rights seek to protect the interest of inventors and developers of products and

processes from being copied by others. The main features of TRIs agreements '(

Y Minimum *tandards of protection to be provided by each member.

Y omestic procedures must be put in place for enforcement of IRs by each member nation.

Y ispute *ettlement between 1T< members.

greement on TRIs cover the following areas opyright and related rights, trade marks including services

marks, industrial designs, geographical indications, patents, layout designs of integrated circuits and

protection of undisclosed information or trade secrets.

1T


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The oha onference held in oha, atar in -ov. ?;;7, recognised the need to protect public health and to

provide medicines to all. 0ere the developing countries need not source their essential medicines at high

cost from M-s from developed countries, which have patents. ountries like India, hina and Bra+il would

benefit as they possess the resources and technology to manufacture essential medicines and e"port these

without having to secure compulsory licensing from patent holders.

6, /eo2ra*%i" In4i"ation Stat$#4)I*5'(1T< also provides )I* for certain items.


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Y ositive TRIMs '(

These include investment incentive to move to the country in !uestion or to move to a specific place within

that country.

Y -egative TRIMs 'Z

These include local e!uity re!uirements, licensing re!uirements, foreign e"change restrictions, transfer of

technology re!uirements, trade balancing re!uirements, import ( e"port re!uirements etc.

B5


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Through #oint ventures or partnership foreign firms may enter in India. This will enable Indian firms to e"pand

and diversify their service activities with professional e"pertise and foreign support.

In many developing countries, sectors like travel and tourism, hotels, retail trading, banking, insurance,

education and communication are open for international competition.

. -2)TIH2 IMT


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6nder )T* agreement, member nations have liberalised service sector. India would benefit from this

agreement. &or 2g'( India%s services e"ports have increased from about : billion 6* L in 788: to 8E billion

6* L in ?;;8(7;. *oftware services accounted for about >:F of service e"ports.

, Forei2n In(e#t5ent :-

India has withdrawn a number of measures against foreign investment, as er the commitments made to

1T


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services sector for foreign companies. The developing countries including India have opened up services

sector in respect of banking, insurance, communication, telecom, transport etc. to foreign firms. The

domestic firms of developing countries may find it difficult to compete with giant foreign firms due to lack of

resources N professional skills.

7, -on ( Tariff Barriers '(

*everal countries have put up trade barriers and non ( tariff barriers following the formation of 1T

monetary policy of reserve bank of india,bop,foreign exchane

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