IB0015- Foreign Trade of India

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ASSIGNMENT

 

 

 

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

 

 

Q.1 Analyze the changes in the composition of India’s foreign trade since 2001.

 

Ans : Overall picture of changes in composition of trade:

 

Foreign trade in India includes all imports and exports to and from India. At the level of Central Government it is administered by the Ministry of Commerce and Industry. While the growth rate of the Indian economy has been increasing in recent times, though, with fluctuation but one phenomenon which was observed was that the growth performance

of the three major sectors of the economy, namely,

 

 

 

Q.2 Discuss the regulatory framework of India’s foreign trade.

 

Ans : Important laws governing exports and imports of India:

 

1. Foreign Trade (Development and Regulation) Act, 1992:

 

In India, exports and imports are regulated by the Foreign Trade (Development and Regulation) Act, 1992, which replaced the Imports and Exports(Control) Act, 1947, and gave the Government of India enormous powers to control it. It authorizes the Central Government to formulate and announce an Export and Import (EXIM) Policy and also amend the same from time to time, by notification in the Official Gazette. It provides for the appointment of a Director General of Foreign Trade by the Central Government for the purpose of the

 

 

Q. 3 List the thrust exports markets of India. Which products are categorized as thrust export products? Discuss.

 

Ans : Thrust exports markets of India:

 

The major thrust export markets of India are given below :

 

1. Engineering/Electrical/Electronics and allied.

(i) Engineering (in general)

(ii) Auto sector

 

 

Q.4 How is services trade important for India? List the important services.

 

Ans : Importance:

 

The Indian Trade Service (ITS), Group ‘A’ Civil Service, was created as a specialized cadre to handle India’s international trade & commerce on the basis of the recommendations of the Mathur Committee (Study Team on the Import and Export Trade Control Organization headed by Sri H.C. Mathur, Member of Parliament) in 1965. At present Directorate General of Foreign Trade (DGFT), Ministry of Commerce is the cadre controlling authority of the ITS, has many regional offices across India, and plays a significant role in India’s foreign trade with its policy formulation and implementation.

 

 

 

 

Q.5 Explain the various systems of quoting exchange rates. What is the meaning of option forward rates?

 

Ans : Systems of quoting exchange rates:

 

1. Direct quotation:

 

This is also known as price quotation. The exchange rate of the domestic currency is expressed as equivalent to a certain number of units of a foreign currency. It is usually expressed as the amount of domestic currency that can be exchanged for 1 unit or 100 units of a foreign currency. The more valuable the domestic currency, the smaller the amount of domestic currency needed to exchange for a foreign currency unit and this gives a lower exchange rate. When the domestic currency becomes less valuable, a greater amount is needed

 

 

 

 

Q.6 List the types of currency risk and explain how they are managed.

 

Ans: Types of currency risk:

 

Currency risk is a form of risk that originates from changes in the relative valuation of currencies. These changes can result in unpredictable gains and losses when the profits or dividends from an investment are converted from the foreign currency into U.S. dollars. Investors can reduce currency risk by using hedges and other techniques designed to offset any currency-related gains or losses.

For example, suppose that a U.S.-based investor purchases a German stock for 100 euros. While holding this bond, the euro exchange rate falls

 

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