The Indian rupee is linked to a basket of important currencies of the country’s major trading partners. The major objective of exchange rate policy is to adjust exchange rates in such way as to promote the competitiveness of Indian exports in the world market. Adjustments in the external value of the rupee are therefore made from time to time. The Reserve Bank of India effected an exchange rate adjustment on 1 July, 1991 in which the value of the rupee declined by about 7 to 9 per cent against the major currencies (the Pound Sterling, the US Dollar, the Deutschmark, the French Franc and the Yen). There was another exchange rate adjustment on 3 July, 1991 in which the value of the rupee declined by about 10 to 11 per cent against the major currencies. Between 28 June and 3 July, 1991, the rupee depreciated by about 18 per cent Continue reading
Managerial Economics
Managerial Economics generally refers to the integration of economic theory with business practice. It deals with the use of economic concepts and principles of business decision making. Managerial Economics is thus constituted of that part of economic knowledge or economic theories which is used as a tool of analyzing business problems for rational business decisions. Managerial economics can be viewed by most modern economists as a practical application of economics theory in using effectively the firms scarce resources.
Methods of Internationalization
In the process of globalization, a firm operates their activities globally and the internationalization process is one of the primary sites of attention. The changes in the technology in the fields of telecommunications and computer lessen the costs of cross border operations and encourage firms to engage in transnational production activities. Internationalization is a sequential process where firms internalize their economic activities characterized in terms of aggressiveness and motivated by either internal or external triggers or a combination of both. It is one of the key strategic decisions for firms to maximize or at least sustain profits to survive in the world of uncertainty and complexity. The global economic expansion has been largely facilitated by the growth of TNCs. They dominate world trade and capital movement with turnover exceeding the GNP of some countries. These corporations continue to grow and influence the landscape of the world economy. Once a firm Continue reading
Current Account Convertibility
Current account convertibility refers to freedom in respect of payments and transfers for current international transactions. In other words, if Indians are allowed to buy only foreign goods and services but restrictions remain on the purchase of assets abroad, it is only current account convertibility. As of now, convertibility of the rupee into foreign currencies is almost wholly free for current account i.e. in case of transactions such as trade, travel and tourism, education abroad etc. The Government of India introduced a system of Partial Rupee Convertibility (PCR) (Current Account Convertibility) on February 29,1992 as part of the Fiscal Budget for 1992-93. PCR is designed to provide a powerful boost to export as well as to achieve as efficient import substitution. It is designed to reduce the scope for bureaucratic controls, which contribute to delays and inefficiency. Government liberalized the flow of foreign exchange to include items like amount of Continue reading
Price Elasticity Of Demand – Concept and Types
The price elasticity of demand measures the degree of responsiveness of quantity demanded for a certain commodity to the change in its price. In other words, the price elasticity of demand is defined as the ‘ratio of percentage change in the quantity demanded to the percentage change in price. It can be expressed as follows: Price elasticity of demand (ep) = Percentage change in quantity of demand / Percentage change in price Where, ep = Coefficient of price elasticity of demand. The price elasticity of demand is always negative due to the inverse relationship between the price and quantity demanded. But for the sake of simplicity in understanding the magnitude of response of quantity demanded to the change in the price we ignore the negative sign and take into account only the numerical value of the price elasticity of demand. Types of Price Elasticity of Demand There are five types of Continue reading