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Credit
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Debit
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Net
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A.
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CURRENT ACCOUNT
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1.
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MERCHANDISE
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a.
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Exports (on f.o.b. basis)
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b.
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Imports (on c.i.f. basis)
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2.
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INVISIBLES (a + b + c)
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a.
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Services
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i. Travel
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ii. Transportation
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iii. Insurance
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iv. G.n.i.e
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v. Miscellaneous
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b.
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Transfers
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vi. Official
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vii. Private
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c.
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Investment Income
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Total Current Account (1 + 2)
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B.
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CAPITAL ACCOUNT
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1.
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FOREIGN INVESTMENT (a + b)
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a.
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In India
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i. Direct
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ii. Portfolio
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b.
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Abroad
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2.
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LOANS (a + b + c)
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a.
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External Assistance
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i. By India
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ii. To India
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b.
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Commercial Borrowings (MT and LT)
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i. By India
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ii. To India
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c.
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Short-term
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To India
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3.
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BANKING CAPITAL (a + b)
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a.
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Commercial Banks
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i. Assets
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ii. Liabilities
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iii. Non-Resident Deposits
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b.
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Others
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4.
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RUPEE DEBT SERVICE
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5.
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OTHER CAPITAL
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Total Capital Account (1 + 2 + 3 + 4 + 5)
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C.
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ERRORS AND OMISSIONS
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D.
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OVERALL BALANCE (A + B + C)
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E.
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MONETARY MOVEMENTS (i + ii)
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i.
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I.M.F.
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ii.
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Foreign Exchange Reserves
(Increase – / Decrease +) |
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The item ‘Rupee Debt Service’ is defined as the cost of meeting interest payments and regular contractual repayments of principal of a loan along with any administration charges in rupees by India
Among the drawbacks, the foremost is the loss of control over interest rates. The equilibrium in the forex markets is established at the point where the domestic interest rates in the economy are in accordance with the underlying economic fundamentals of the domestic and the anchor currency economy and the fixed exchange rate. A high inflation in the domestic markets can result in low or even negative real interest rate. This may cause an asset price bubble as money is borrowed at low interest rates and put in financial and real assets. The excess demand for these assets makes their prices go up to unrealistically high levels. When the interest rates start rising due to any endogenous or exogenous reason, these prices come crashing down due to the high selling pressure and thus cause a financial panic. Another effect of the inability of the board to set interest rates is that an important tool for controlling the level of economic activity becomes inoperative. Interest rates cannot be used to control the inflation level in the economy and hence the level of economic activity. The economy may thus become exposed to phases of painful contraction and inflation. Further, this system, in order to operate efficiently, needs wages to be flexible. In case of the domestic economy facing a higher degree of
In the early 50s, the US was running a BoP surplus, and hence there was a shortage of dollars in the international markets. By the late 50s, however, the US BoP situation had reversed and there was an excess supply of dollars. So much so, that there was a considerable reduction in US’s gold holdings and the general
In December 1991, as a follow up to the Delor’s report, the Treaty of Rome was revised extensively to provide for the monetary union. As these revisions were adopted in the Dutch town of Maastricht, they collectively came to be known as the Maastricht Treaty. The treaty laid down the timetable for the monetary union. According to the timetable, the union was to be completed by 1999, and the qualifying countries had to fulfill criteria regarding inflation rates, exchange rates, interest rates and budget deficits. As the markets believed these criteria to be too hard for some countries to achieve, speculative pressure against the currencies of these countries started building up. By September 1992, the pressure reached its peak. The first country to bear the brunt of the speculative attacks was Italy. Even as its government announced a set of fiscal reforms to be able to meet the convergence criteria, pressures against the lira continued. Finally, Germany and Italy entered into a deal under which Italy devalued the lira and Germany reduced its interest rates. The UK was also facing a similar attack on its currency, and had to withdraw from the EMS soon after the Italian devaluation. Despite having already devalued its currency, Italy followed Britain and pulled its currency out of the EMS. Immediately afterwards, French voters approved the Maastricht treaty. Yet, this approval could not stop an attack against the French franc. Even Bundesbank and the Banque de France (the French central bank) together could not postpone the inevitable for long. In July 1993, there was another attack on the franc as it became clear that the French and German interest rates would not converge. The French unemployment rates being very high and continuing to rise, it could be foreseen that a further possibility of interest rates rising there did not exist. At the same time, the German government could not be expected to reduce the interest rates as inflation was still not
In December 1991, as a follow up to the Delor’s report, the Treaty of Rome was revised extensively to provide for the monetary union. As these revisions were adopted in the Dutch town of Maastricht, they collectively came to be known as the Maastricht Treaty. The treaty laid down the timetable for the monetary union. According to the timetable, the union was to be completed by 1999, and the qualifying countries had to fulfill criteria regarding inflation rates, exchange rates, interest rates and budget deficits. As the markets believed these criteria to be too hard for some countries to achieve, speculative pressure against the currencies of these countries started building up. By September 1992, the pressure reached its peak. The first country to bear the brunt of the speculative attacks was Italy. Even as its government announced a set of fiscal reforms to be able to meet the convergence criteria, pressures against the lira continued. Finally, Germany and Italy entered into a deal under which Italy devalued the lira and Germany reduced its interest rates. The UK was also facing a similar attack on its currency, and had to withdraw from the EMS soon after the Italian devaluation. Despite having already devalued its currency, Italy followed Britain and pulled its currency out of the EMS. Immediately afterwards, French voters approved the Maastricht treaty. Yet, this approval could not stop an attack against the French franc. Even Bundesbank and the Banque de France (the French central bank) together could not postpone the inevitable for long. In July 1993, there was another attack on the franc as it became clear that the French and German interest rates would not converge. The French unemployment rates being very high and continuing to rise, it could be foreseen that a further possibility of interest rates rising there did not exist. At the same time, the German government could not be expected to reduce the interest rates as inflation was still not
Landmark Judgments: Important Provisions of the EPF & ESI Act interpreted by the Honorable Supreme Court of India