Showing posts with label GLOBAL ECONOMY. Show all posts
Showing posts with label GLOBAL ECONOMY. Show all posts

Sunday, February 10, 2013

Venezuela announces currency devaluation

Venezuela’s government has announced that is devaluing the country’s currency, a change expected to push up prices in the heavily import-reliant economy.
The fixed exchange rate is changing from 4.30 bolivars to the dollar to 6.30 bolivars to the dollar.
The devaluation had been widely expected by analysts in recent months.
It was the first devaluation to be announced by President Hugo Chavez’s government since 2010.
Planning and Finance Minister Jorge Giordani said the new rate takes effect immediately, though the old rate would still be allowed for some transactions that already were approved by the state currency agency.
Venezuela’s government has had strict currency exchange controls since 2003 and maintains a fixed, government-set exchange rate.
Under the currency controls, people and businesses must apply to a government currency agency to receive dollars at the official rate to import goods, pay for travel or cover other obligations.
While those controls have restricted the amounts of dollars available at the official rate, an illegal black market has also flourished and the value of the bolivar has recently been eroding.
In black market trading, dollars have recently been selling for more than four times the official exchange rate of 4.30 bolivars to the dollar.

Globalization and International Business

Globalization is a process through which different economies of the world gradually lift up the restrictions, that hinders the free flow goods, services, resources etc. across various political boundaries.
This is done in particular through International Business (carries out mainly through International Trade and Investment), aided by sophisticated technologies and market integration.

International Business

International Business means carrying out businesses beyond national boundaries. The international business includes both International Trade as well as Foreign Direct Investment (FDI).
International Trade can broadly be divided into two parts viz. Export and Import.
  • Export - The transaction of goods and services (via. sales, barter, gift or grant) from home country to the host country is called Export.
  • Import - The transaction of goods and services (via. sales, barter, gift or grant) to home country from host country is called Import.
Foreign Direct Investment occurs when an investor based in one country (at home country) acquires an asset in another country (the host country) with intent to manage that asset. It is the management dimension that typically differentiates FDI from Portfolio Investment in foreign securities and financial instruments in foreign securities  and financial instruments.

In most cases both the investor and the asset it manages abroad are business entity. In such a case investor is typically referred to as 'parent firm' and the asset it manage is called 'affiliate' or 'subsidiary'.
Motive behind Foreign Direct Investment (FDI) includes:-
  • Acquiring natural resources
  • Recovery of large expenditure made on research and development
  • Capturing a large International Market System
  • Earning Large Profit
  • Maintaining Balance of Payment

Importance of International Business

The importance of International Business can be studied at two levels:
Macro Level
  1. No country (be it developed or developing) produces all the commodities to meet its requirement as such it needs to port those commodities that are either not produced or produced in insufficient quantity in domestically to meet its requirements.
  2. At the same time all the countries tries to export all the commodities that are in excess of its domestic consumption.
  3. Maintaining favorable balance of payment.
Micro Level
  1. Maximization of corporate wealth
    Corporate wealth is the value of productive asset plus the present value of wealth created by those assets.
    Alternatively, corporate wealth quals to the sum of total of debt and equity of a firm.
  2. Minimization of cost
    Acquiring the resources which are relatively cheaper helps reduce the cost of production.
  3. Minimization of risk through
    (A) Diversification of business
    (B) Expansion of business

Approaches to International Business

  • Ethnocentric- In this form of approach, the policies of a firm operating in foreign country are based upon that of home country.
  • Polycentric- In this form of approach, the policies of a firm operating in foreign country are based upon that of host country in which it is operating.
  • Geocentric- Between above two approaches, geocentric approach follows a real life situation, where there exist no distinction (or boundaries) of framing the policies in terms of either home or host country. This approach aims to fit the "right policy at right place".

Tuesday, October 9, 2012

IMF cuts India’s growth forecast for 2012 to 4.9 pc

The International Monetary Fund (IMF) has slashed India’s growth forecast to 4.9 per cent for 2012 due to low business confidence and “sluggish structural reforms.”
The IMF had in July projected a growth rate of 6.1 per cent for the current year. During the first quarter ended June 2012, Indian economy expanded by 5.5 per cent.
“India’s activity suffered from waning business confidence amid slow approvals for new projects, sluggish structural reforms, policy rate hikes designed to rein in inflation, and flagging external demand,” IMF said in the World Economic Outlook (WEO) released in Tokyo ahead of the IMF-World Bank 2012 Annual Meetings.
In India, the report said, “growth weakened more than expected in the first half of 2012, an outcome of stalled investment caused by governance issues and red tape, and a deterioration in business sentiment against the backdrop of a rising current account deficit and the recent rupee depreciation.”
Compared with the region’s growth performance in recent years, the near— and medium—term outlooks are less buoyant, the report said.
The report has projected 6 per cent growth for the next year (2013), compared to an earlier 6.5 per cent projection.
For 2012—13 fiscal, the IMF said that growth is projected to average 5—6 per cent in 2012—13, more than one percentage point lower than in the April 2012 WEO.
“The downgrade reflects both an expectation that current drags on business sentiment and investment will persist and a weaker external environment,” the report said.

Tuesday, September 25, 2012

India ranked 111th in economic freedom list

India ranks very low at 111th position in terms of economic freedom, behind countries like China, Nepal and Bangladesh, a global study has claimed in a worldwide index of 144 nations.

The annual ranking, titled 'Economic Freedom of the World: 2012', is topped by Hong Kong, followed by Singapore, New Zealand, Switzerland (8.24) and Australia in the top-five.

The index has been prepared by Canada-based public policy think-tank, Fraser Institute, in cooperation with independent institutes in 90 nations and territories, and claims to measure the degree to which the policies and institutions of countries support economic freedom.

India's ranking has fallen from 103rd last year, while Hong Kong has retained its top slot, the report said.

Canada is ranked sixth on the list, while others in the top-ten include Bahrain, Mauritius, Finland and Chile. The countries with lowest level of economic freedom are -- Myanmar, Zimbabwe, Republic of Congo and Angola.

India shares its 111th position with two other countries, Iran and Pakistan, while those ranked lower include Guyana, Syria and Nigeria.

India has scored an overall rating of 6.26 in the economic freedom index as against an average global scrore of 6.83.

In the economic freedom index, China is at 107th position with a score of 6.35, Bangladesh at 109th with a score of 6.34 and Nepal is at 110th position (6.33).


The report said that Hong Kong offers the highest level of economic freedom worldwide, with a score of 8.90 out of 10, followed by Singapore (8.69), New Zealand (8.36), Switzerland (8.24), Australia and Canada (each 7.97), Bahrain (7.94), Mauritius (7.90), Finland (7.88) and Chile (7.84).

"Governments around the world embraced heavy-handed regulation and extensive spending in response to the US and European debt crises, reducing economic freedom in the short term and prosperity over the long term," the report noted.

"But the slight increase in this year's worldwide economic freedom score is encouraging. Impressively, all five continents are represented in the global top 10," it added.

The report noted that on an average, the poorest 10 per cent of people in the freest nations are nearly twice as rich as the average population of the least free countries.

Interestingly, the US, which is considered a champion of economic freedom among large industrial nations, continues its protracted decline in the global rankings. This year, the US plunged to its lowest-ever ranking of 18th, after being ranked at as high as second position in 2002.

The decline is attributed to higher spending and borrowing on the part of the US government.

The rankings and scores of other major economies include -Japan (20th), Germany (31st), Korea (37th), France (47th), Italy (83rd), Mexico (91st), Russia (95th) and Brazil (105th).

Wednesday, August 8, 2012

Inflow of FDI

According to the UNCTAD’s World investment Report, 2012, Foreign Direct Investment (FDI) inflows of US $ 684399 million were received in developing economies of the World during 2011, of which India received 4.6%.  FDI inflows, in respect of some of the developing economies, including India, during 2011, are as under:-

2011 US $ (MILLION)
Hong Kong, China
British Virgin Islands

            According to the UNCTAD’s World Investment Report, 2012, Foreign Direct Investment (FDI) inflows of US $ 31554 million have been received in India during 2011, as against FDI inflows of US $ 24159 received during 2010.

Saturday, August 4, 2012

Pakistan allows National Bank of Pakistan & United Bank to open branches in India

Pakistan's central bank has allowed two banks to open branches in India as part of efforts to normalise economic and trade relations between the two countries.

State Bank of Pakistan (SBP) Governor Yasin Anwar told the media that the National Bank of Pakistan and the United Bank Ltd had been given the "green signal" to operate in India.

In a major decision, India  allowed investment from Pakistan paving way for Islamabad to normalise bilateral economic ties by implementing much-delayed Most Favoured Nation (MFN) status for New Delhi.

India's move to allow Pakistani investments has been welcomed by businessmen on both sides of the border.

Earlier this year, Pakistan switched over to a negative list regime for trade with India, paving the way for giving the Most Favoured Nation-status to the neighbouring country.

However, recent reports have indicated that Pakistan has decided to link progress in normalising trade relations to the resolution of other issues, like the Kashmir issue and the Sir Creek border dispute.

Trade between India and Pakistan is worth a little more than $2 billion dollars and the two sides have agreed to increase it to $6 billion dollars by 2014. 

Thursday, January 26, 2012

World Economic Forum at Davos

India will oppose any attempts by developed countries to sign a limited market-opening pact and also call for a check on rising protectionism at the meeting of trade ministers from key WTO member countries at Davos later this week.

Switzerland is hosting a meeting of trade ministers from select countries that include India, China, Brazil, the US and the EU on Saturday on the sidelines of the on-going World Economic Forum at Davos to assess the impact of the economic turmoil on trade and discuss the future of the WTO.

"We have got reports that some developed members are talking about a plurilateral pact in services. We are yet to know the details, but principally we are against plurilateralism within the multilateral framework of the WTO.

A pluriltateral agreement involves a few countries, while a multilateral pact includes all countries that are members of a global organisation, in this case the WTO.

In the absence of a breakthrough in the on-going Doha round of global trade talks that aims to open up markets in both goods and services for all 153 member countries, a number of members, led by the US, have been talking about limited trade opening pacts in select sectors involving just a few important countries.

Last week, Australia hosted a meeting of 16 WTO members that included the EU, the US, Japan, Chile, Honk Kong and even Pakistan, but excluded India, Brazil, China and South Africa, where the US proposed negotiating a plurilateral services agreement.

The Doha talks have reached an impasse as developing countries like India, China and Brazil have refused to give in to the US demand of opening up their markets more than others.

Sunday, January 15, 2012