{"id":17580,"date":"2023-03-20T11:03:24","date_gmt":"2023-03-20T05:33:24","guid":{"rendered":"https:\/\/gstguntur.com\/?p=17580"},"modified":"2023-03-20T11:09:06","modified_gmt":"2023-03-20T05:39:06","slug":"international-trade-notes-ca-inter-economics-notes","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/international-trade-notes-ca-inter-economics-notes\/","title":{"rendered":"International Trade Notes \u2013 CA Inter Economics Notes"},"content":{"rendered":"<p>International Trade Notes \u2013 <a href=\"https:\/\/gstguntur.com\/ca-inter-economics-notes\/\">CA Inter Economics Notes<\/a>\u00a0is designed strictly as per the latest syllabus and exam pattern.<\/p>\n<h2>International Trade Notes \u2013 CA Inter ECO Notes<\/h2>\n<p>1. The Mercantilists\u2019 View of International Trade:<\/p>\n<ul>\n<li>Increase exports and collect precious metals in return<\/li>\n<li>More gold and silver a country accumulates, the richer it becomes<\/li>\n<li>Mercantilism advocated maximizing exports in order to bring in more \u201cspecie\u201d (precious metals) and minimizing imports through the state imposing very high tariffs on foreign goods<\/li>\n<li>Trade is a &#8216;zero-sum game\u2019<\/li>\n<li>Who win does so only at the expense of losers<\/li>\n<li>One country\u2019s gain is equal to another country\u2019s loss<\/li>\n<\/ul>\n<p>2. The Theory of Absolute Advantage:<\/p>\n<ul>\n<li>Adam Smith was the first to put across the possibility that international trade is not a zero-sum game.<\/li>\n<li>Absolute cost advantage is the determinant of mutually beneficial in-ternational trade.<\/li>\n<li>In other words, exchange of goods between two countries will take place only if each of the two countries can produce one commodity at an absolutely lower production cost than the other country.<br \/>\nOutput per Hour of Labour<\/li>\n<\/ul>\n<table border=\"2\">\n<tbody>\n<tr>\n<td width=\"160\">Commodity<\/td>\n<td width=\"160\">Country A<\/td>\n<td width=\"161\">Country B<\/td>\n<\/tr>\n<tr>\n<td width=\"160\">Wheat (bushels\/hour)<\/td>\n<td width=\"160\">6<\/td>\n<td width=\"161\">1<\/td>\n<\/tr>\n<tr>\n<td width=\"160\">Cloth (yards\/hour)<\/td>\n<td width=\"160\">4<\/td>\n<td width=\"161\">5<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<ul>\n<li>Country A is more efficient than country B, or has an absolute advantage over country B in production of wheat.<\/li>\n<li>Similarly, country B is more efficient than country A, or has an absolute advantage over country A in the production of cloth.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"International Trade Notes \u2013 CA Inter Economics Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>3. The Theory of Comparative Advantage:<\/p>\n<ul>\n<li>David Ricardo developed the classical theory of comparative advantage in his book \u2018Principles of Political Economy and Taxation&#8217; published in 1817.<\/li>\n<li>Even if one nation is less efficient than the other nation in the production of all commodities, there is still scope for mutually beneficial trade.<\/li>\n<li>The first nation should specialize in the production and export of the commodity in which its absolute disadvantage is smaller and import the commodity in which its absolute disadvantage is greater.<\/li>\n<\/ul>\n<p>Output per Hour of Labour<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td width=\"161\">Commodity<\/td>\n<td width=\"161\">Country A<\/td>\n<td width=\"161\">Country B<\/td>\n<\/tr>\n<tr>\n<td width=\"161\">Wheat (bushels\/hour)<\/td>\n<td width=\"161\">6<\/td>\n<td width=\"161\">1<\/td>\n<\/tr>\n<tr>\n<td width=\"161\">Cloth (yards\/hour)<\/td>\n<td width=\"161\">4<\/td>\n<td width=\"161\">2<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<ul>\n<li>Country A\u2019s absolute advantage is greater in wheat<\/li>\n<li>Country B\u2019s absolute disadvantage is smaller in cloth, so its comparative advantage lies in cloth production.<\/li>\n<\/ul>\n<p>4. The Heckscher -Ohlin Theory of Trade or Factor-Endowment Theory of Trade or Modem Theory of Trade or Heckscher-Ohlin-Samuelson theorem:<\/p>\n<ul>\n<li>Different regions have different factor endowments (Labour, Capital).<\/li>\n<li>If a country is a capital abundant one, it will produce and export capital intensive goods.<\/li>\n<li>A labour-abundant country will produce and export labour intensive goods<\/li>\n<\/ul>\n<p>5. New Trade Theory &#8211; An Introduction:<\/p>\n<ul>\n<li>New Trade Theory (NTT) is an economic theory that was developed in the 1970\u2019s as a way to understand international trade patterns.<\/li>\n<li>According to NTT, two key concepts give advantages to countries that import goods to compete with products from the home country:<\/li>\n<li>Economies of Scale: If the firm serves domestic as well as foreign market instead of just one, it can reap, the benefit of large scale of production consequently the profits are likely to be higher.<\/li>\n<li>Network effects: The value of the product or service is enhanced as the number of individuals using it increases. This is also referred to as the \u2018bandwagon effect\u2019.<\/li>\n<\/ul>\n<p>6. Forms of Import Tariffs:<\/p>\n<ul>\n<li>Specific Tariff fixed monetary tax per physical unit of the good imported<\/li>\n<li>Advalorem tariff constant percentage of the monetary value of one unit of the imported good<\/li>\n<li>Mixed Tariffs 5 percent ad valorem or \u20b9 3,000 per tonne, whichever is higher<\/li>\n<li>Compound Tariff or a Compound Duty is a combination of an ad valorem and a specific tariff<\/li>\n<li>Technical\/Other Tariff the duties are payable by its components or related items<\/li>\n<li>Tariff Rate Quotas imports above the quota face a much higher tariff<\/li>\n<li>Most-Favoured Nation Tariffs MFN rates are the highest (most restrictive) that WTO members charge one another<\/li>\n<li>Variable Tariff a duty typically fixed to bring the price up to the domestic support price<\/li>\n<li>Preferential Tariff a lower tariff is charged from goods imported from a country which is given preferential treatment<\/li>\n<li>Bound Tariff which a WTO member binds itself with a legal commitment not to raise it above a certain level<\/li>\n<li>Applied Tariffs duty that is actually charged on imports<\/li>\n<li>Escalated Tariff nominal tariff rates on imports of manufactured goods are higher than tariff rates on intermediate inputs and raw materials<\/li>\n<li>Prohibitive tariff so high that no imports will enter<\/li>\n<li>Import subsidies<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"International Trade Notes \u2013 CA Inter Economics Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>7. Tariffs as Response to Trade Distortions:<\/p>\n<ul>\n<li>Anti-dumping Duties: Dumping occurs when manufacturers sell goods in a foreign country below the sales prices in their domestic market or below their full average cost of the product. Anti-dumping duty is additional import duty so as to offset the foreign firm\u2019s unfair price advantage.<\/li>\n<li>Countervailing Duties: Countervailing duties are tariffs that aim to offset the artificially low prices charged by exporters who enjoy export subsidies and tax concessions offered by the governments in their home country.<\/li>\n<\/ul>\n<p>8. Effects of Tariffs:<\/p>\n<ul>\n<li>Tariff barriers create obstacles to trade, decrease the international trade<\/li>\n<li>Tariffs discourage import<\/li>\n<li>Protect domestic industries<\/li>\n<li>The price increase in the domestic market<\/li>\n<li>An increase in the output of the existing firm<\/li>\n<li>An increase in employment in the industry<\/li>\n<li>Prevent countries from enjoying gains from trade arising from compar-ative advantage.<\/li>\n<li>Tariffs increase government revenues<\/li>\n<\/ul>\n<p>9. Non &#8211; Tariff Measures (NTMs):<br \/>\nNon-tariff measures comprise all types of measures which alter the conditions of international trade, including policies and regulations that restrict trade and those that facilitate it:<\/p>\n<ul>\n<li>Technical Measures<\/li>\n<li>Non-technical Measures<\/li>\n<\/ul>\n<p>10. Technical Measures:<\/p>\n<ul>\n<li>Sanitary and Phytosanitary (SPS) Measures: SPS measures are applied to protect human, animal or plant life from risks arising from additives, pests, contaminants, toxins or disease-causing organisms and to protect biodiversity<\/li>\n<li>Technical Barriers To Trade(TBT): Mandatory \u2018Standards and Technical Regulations\u2019 that define the specific characteristics that a product should have, such as its size, shape, design, labelling\/marking\/packaging, functionality or performance and production methods, excluding measures covered by the SPS Agreement<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"International Trade Notes \u2013 CA Inter Economics Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>11. Non &#8211; Technical Measures:<\/p>\n<ul>\n<li>Import Quotas<\/li>\n<li>Price Control Measures\/Para Tariff Measures<\/li>\n<li>Non-automatic Licensing and Prohibitions<\/li>\n<li>Financial Measures<\/li>\n<li>Measures Affecting Competition<\/li>\n<li>Government Procurement Policies<\/li>\n<li>Trade-Related Investment Measures<\/li>\n<li>Distribution Restrictions<\/li>\n<li>Restriction on Post-sales Services<\/li>\n<li>Administrative Procedures<\/li>\n<li>Rules of origin<\/li>\n<li>Safeguard Measures<\/li>\n<li>Embargos\/Total Ban<\/li>\n<\/ul>\n<p>12. Export &#8211; Related Measures:<\/p>\n<ul>\n<li>Ban on exports<\/li>\n<li>Export Taxes<\/li>\n<li>Export Subsidies and Incentives<\/li>\n<li>Voluntary Export Restraints<\/li>\n<\/ul>\n<p>13. Taxonomy of Regional Trade Agreements (RTAS):<\/p>\n<ul>\n<li>Unilateral trade agreements<\/li>\n<li>Bilateral Agreements<\/li>\n<li>Regional Preferential Trade Agreements<\/li>\n<li>Trading Bloc: group of countries that have a free trade agreement be-tween themselves<\/li>\n<li>Free-trade area: group of countries that eliminate all tariff barriers independence in determining their tariffs with non-members<\/li>\n<li>A customs union: group of countries that eliminate all tariffs on trade among themselves but maintain a common external tariff on trade with countries<\/li>\n<li>Common Market: free flow of factors of production labour and capital<\/li>\n<li>Economic and Monetary Union: common currency and macroeconomic policies<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"International Trade Notes \u2013 CA Inter Economics Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>14. The General Agreement on Tariffs and Trade (GATT):<\/p>\n<ul>\n<li>GATT provided the rules for much of world trade for 47 years, from 1948 to 1994,<\/li>\n<li>It was only a multilateral instrument governing international trade or a provisional agreement<\/li>\n<li>The original intention to create an International Trade Organization (ITO) did not succeed<\/li>\n<li>The Kennedy Round in the mid-sixties, and the Tokyo Round in the 1970s led to massive reductions in bilateral tariffs, establishment of negotiation rules and procedures on dispute resolution, dumping and licensing<\/li>\n<li>The eighth, the Uruguay Round of 1986-94, was the last and most consequential of all rounds and culminated in the birth of WTO and a new set of agreements.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"International Trade Notes \u2013 CA Inter Economics Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>15. The GATT lost its relevance by 1980s because:<\/p>\n<ul>\n<li>It was obsolete<\/li>\n<li>International investments had expanded substantially<\/li>\n<li>Intellectual property rights and trade in services were not covered<\/li>\n<li>Liberalizing agricultural trade were not successful<\/li>\n<li>Inadequacies in institutional structure and dispute settlement system<\/li>\n<\/ul>\n<p>16. The Uruguay Round and the Establishment of WTO:<\/p>\n<ul>\n<li>The need for a formal international organization which is more powerful and comprehensive was felt by late 1980s<\/li>\n<li>Members established 15 groups to work<\/li>\n<li>The Round started in Uruguay in September 1986<\/li>\n<li>Finally, in December 1993, the Uruguay Round was completed after seven years<\/li>\n<li>The agreement was signed by most countries on April 15, 1994, and took effect on July 1, 1995.<\/li>\n<li>It also marked the birth of the World Trade Organization (WTO)<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"International Trade Notes \u2013 CA Inter Economics Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>17. The World Trade Organization (WTO):<\/p>\n<ul>\n<li>The most important outcome of the Uruguay Round agreement was the replacement of the GATT secretariat with the WTO in Geneva with authority not only in trade in industrial products but also in agricultural products and services.<\/li>\n<li>The objectives of the WTO Agreements include \u201craising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services\u201d.<\/li>\n<li>The principal objective of the WTO is to facilitate the flow of international trade smoothly, freely, fairly and predictably<\/li>\n<\/ul>\n<p>18. The Structure of the WTO:<\/p>\n<ul>\n<li>Secretariat located in Geneva, headed by a Director General<\/li>\n<li>It has a three-tier system of decision making<\/li>\n<li>The WTO\u2019s top level decision-making body is the Ministerial Conference<\/li>\n<li>The next level is the General Council<\/li>\n<li>At the next level, the Goods Council, Services Council and Intellectual Property (TRIPS) Council<\/li>\n<\/ul>\n<p>19. The Guiding Principles of World Trade Organization (WTO):<\/p>\n<ul>\n<li>Trade without discrimination<\/li>\n<li>The National Treatment Principle (NTP)<\/li>\n<li>Free trade\/&#8221;progressive liberalization\u201d<\/li>\n<li>Predictability<\/li>\n<li>Principle of general prohibition of quantitative restrictions<\/li>\n<li>Greater competitiveness<\/li>\n<li>Tariffs as legitimate measures for the protection of domestic industries<\/li>\n<li>Transparency in Decision Making<\/li>\n<li>Market Access<\/li>\n<li>Special privileges to less developed countries<\/li>\n<li>Protection of Health &amp; Environment<\/li>\n<li>A transparent, effective and verifiable dispute settlement mechanism<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"International Trade Notes \u2013 CA Inter Economics Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>20. The Doha Round:<\/p>\n<ul>\n<li>The Doha Round, which is the ninth round, in November 2001<\/li>\n<li>Seeks to accomplish major modifications through lower trade barriers and revised trade rules<\/li>\n<li>The negotiations include 20 areas of trade<\/li>\n<li>The most controversial topic in the yet to conclude Doha Agenda has been agriculture trade.<\/li>\n<\/ul>\n<p>21. The Exchange Rate:<br \/>\nExchange rate is the rate at which the currency of one country exchanges for the currency of another country.<\/p>\n<ul>\n<li>A direct quote is the number of units of a local currency exchangeable for one unit of a foreign currency. Example: \u20b9 66 is needed to buy one US dollar<\/li>\n<li>An indirect quote is the number of units of a foreign currency exchange-able for one unit of local currency. Example: $ 0.0151 per rupee<\/li>\n<\/ul>\n<p>22. The Exchange Rate Regimes:<br \/>\nIt refers to the method by which the value of the domestic currency in terms of foreign currencies is determined. There are two types of exchange rate regimes:<\/p>\n<ul>\n<li>Floating exchange rate regime (also called a flexible exchange rate):<br \/>\nThe equilibrium value of the exchange rate of a country\u2019s currency is market determined, and<\/li>\n<li>Fixed exchange rate regime\/pegged exchanged rate:<br \/>\nCentral Bank and\/or government announces what its currency will be worth in terms of either another country\u2019s currency or a basket of currencies or another measure of value, such as gold.<\/li>\n<\/ul>\n<p>23. The Main Advantages of a Fixed Rate Regime are:<\/p>\n<ul>\n<li>Eliminates exchange rate risks<\/li>\n<li>Enhance international trade<\/li>\n<li>Lower levels of inflation<\/li>\n<li>Stability encourages investment<\/li>\n<li>Enhance the credibility of the country\u2019s monetary policy<\/li>\n<li>Adequate amount of foreign exchange reserves<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"International Trade Notes \u2013 CA Inter Economics Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>24. The Main Advantages of a Floating Rate Regime are:<\/p>\n<ul>\n<li>Independent monetary policy<\/li>\n<li>Exchange rate can be used as a policy tool<\/li>\n<li>The central bank is not required to maintain a huge foreign exchange reserves<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"International Trade Notes \u2013 CA Inter Economics Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>25. Nominal Versus Real Exchange Rates:<\/p>\n<ul>\n<li>Nominal exchange rate: how much of one currency can be traded for a unit of another currency when prices are constant.<\/li>\n<li>The \u2018Real exchange rate\u2019: describes \u2018how many\u2019 of a good or service in one country can be traded for \u2018one\u2019 of that good or service in a foreign country. It is calculated as:<\/li>\n<\/ul>\n<p>Real exchange rate = Nominal exchange rate \u00d7 \\(\\frac{\\text { Domestic Price Index }}{\\text { Foreign Price Index }}\\)<\/p>\n<p>26. The Foreign Exchange Market:<br \/>\nThe wide-reaching collection of markets and institutions that handle the ex-change of foreign currencies is known as the foreign exchange market.<\/p>\n<p>In the foreign exchange market, there are two types of transactions:<\/p>\n<ul>\n<li>Current transactions which are carried out in the spot market and the exchange involves immediate delivery, and<\/li>\n<li>Contracts to buy or sell currencies for future delivery which are carried out in forward and\/or futures markets.<\/li>\n<\/ul>\n<p>27. Determination of Nominal Exchange Rate:<br \/>\nThe supply of and demand for foreign exchange in the domestic foreign ex-change market determine the country\u2019s exchange rate.<\/p>\n<p>28. Devaluation (Revaluation) Vs Depreciation (Appreciation):<\/p>\n<ul>\n<li>Devaluation is a deliberate downward adjustment in the value of a country\u2019s currency relative to another currency, group of currencies or standard and depreciation is a decrease in a currency\u2019s value due to market forces.<\/li>\n<li>Revaluation is the opposite of devaluation and the term refers to a discrete raising of the otherwise fixed par value of a nation&#8217;s currency and appreciation is an increase in a currency\u2019s value due to market forces.<\/li>\n<\/ul>\n<p>29. Impacts of Exchange Rate Fluctuations on Domestic Economy:<\/p>\n<ul>\n<li>Changes in import spending and export revenue<\/li>\n<li>Changing the relative prices of domestically-produced and foreign-pro-duced goods and sendees<\/li>\n<li>Affect economic activity in the domestic economy<\/li>\n<li>Currency depreciation helps in increases the volume of exports and promotes trade balance.<\/li>\n<li>Increased import prices will increase firms\u2019 cost of production, push domestic prices up and decrease real output.<\/li>\n<li>For an economy where exports are significantly high, a depreciated currency would mean a lot of gain.<\/li>\n<li>Make financial forecasting more difficult for firms<\/li>\n<li>Depreciating currency hits investor sentiments<\/li>\n<\/ul>\n<p>30. Types of Foreign Capital:<\/p>\n<ul>\n<li>Foreign aid or assistance which may be:\n<ul>\n<li>Bilateral or direct inter government grants<\/li>\n<li>Multilateral aid<\/li>\n<li>Tied aid<\/li>\n<li>Foreign grants which are voluntary transfer<\/li>\n<\/ul>\n<\/li>\n<li>Borrowings which may take different forms such as:\n<ul>\n<li>Direct inter government loans<\/li>\n<li>Loans from international institutions (e.g. world bank, IMF, ADB)<\/li>\n<li>Soft loans for e.g. from affiliates of World Bank such as IDA<\/li>\n<li>External commercial borrowing, and<\/li>\n<li>Trade credit facilities<\/li>\n<\/ul>\n<\/li>\n<li>Deposits from non-resident Indians (NRI)<\/li>\n<li>Investments in the form of:\n<ul>\n<li>Foreign portfolio investment (FPI) in bonds, stocks and securities, and<\/li>\n<li>Foreign direct investment (FDI) in industrial, commercial and similar other enterprises<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>31. Foreign Direct Investment (FDI):<br \/>\nForeign direct investment is defined as a process whereby the resident of one country (ie. home country) acquires ownership of an asset in another country (le. the host country) and such movement of capital involves ownership, control as well as management of the asset in the host country.<\/p>\n<p>FDI may be categorized as horizontal, vertical or conglomerate:<\/p>\n<ul>\n<li>A horizontal direct investment: same type of business<\/li>\n<li>A vertical investment: different from main business activity yet in some way supplements its major activity<\/li>\n<li>A conglomerate: unrelated to its existing business in its home country<\/li>\n<\/ul>\n<p>32. Modes of Foreign Direct Investment (FDI):<\/p>\n<ul>\n<li>Opening of a subsidiary in a foreign country,<\/li>\n<li>Equity injection into an overseas company,<\/li>\n<li>Acquiring a controlling interest in an existing foreign company,<\/li>\n<li>Mergers and acquisitions (M&amp;A),<\/li>\n<li>Joint venture with a foreign company,<\/li>\n<li>Green field investment<\/li>\n<\/ul>\n<p>33. Foreign Portfolio Investment (FPI):<br \/>\nForeign portfolio investment is the flow of what economists call &#8216;financial capital\u2019 rather than &#8216;real capital&#8217; and does not involve ownership or control on the part of the investor.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"International Trade Notes \u2013 CA Inter Economics Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>34. Foreign Direct Investment (FDI) Fs. Foreign Portfolio Investment (FPI):<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td width=\"241\">Foreign direct investment (FDI)<\/td>\n<td width=\"242\">Foreign portfolio investment (FPI)<\/td>\n<\/tr>\n<tr>\n<td width=\"241\">Investment involves creation of physical assets<\/td>\n<td width=\"242\">Investment is only in financial assets<\/td>\n<\/tr>\n<tr>\n<td width=\"241\">Has a long term interest and therefore remain invested for long<\/td>\n<td width=\"242\">Only short term interest and generally remain invested for short periods<\/td>\n<\/tr>\n<tr>\n<td width=\"241\">Relatively difficult to withdraw<\/td>\n<td width=\"242\">Relatively easy to withdraw<\/td>\n<\/tr>\n<tr>\n<td width=\"241\">Not inclined to be speculative<\/td>\n<td width=\"242\">Speculative in nature<\/td>\n<\/tr>\n<tr>\n<td width=\"241\">Often accompanied by technology transfer<\/td>\n<td width=\"242\">Not accompanied by technology transfer<\/td>\n<\/tr>\n<tr>\n<td width=\"241\">Direct impact on employment of labour and wages<\/td>\n<td width=\"242\">No direct impact on employment of labour and wages<\/td>\n<\/tr>\n<tr>\n<td width=\"241\">Enduring interest in management and control<\/td>\n<td width=\"242\">No abiding interest in management and control<\/td>\n<\/tr>\n<tr>\n<td width=\"241\">Securities are held with significant degree of influence by the investor on the management of the enterprise<\/td>\n<td width=\"242\">Securities are held purely as a financial investment and no significant degree of influence on the management of the enterprise<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>35. Reasons for Foreign Direct Investment:<\/p>\n<ul>\n<li>The chief motive for shifting of capital between different regions or between different industries is the expectation of higher rate of return than what is possible in the home country<\/li>\n<li>Investment in a host country may be found profitable by foreign firms because of some firm-specific knowledge or&#8217; assets<\/li>\n<\/ul>\n<p>36. Benefits of Foreign Direct Investment:<\/p>\n<ul>\n<li>Competitive environment in the host country<\/li>\n<li>Enhance the total output<\/li>\n<li>FDI can accelerate growth and foster economic development<\/li>\n<li>Political reforms, including legal systems and macroeconomic policies<\/li>\n<li>It generates direct and indirect employment in the recipient country<\/li>\n<li>Promote relatively higher wages for skilled jobs<\/li>\n<li>Source of new tax revenue<\/li>\n<li>Better work culture and higher productivity standards<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"International Trade Notes \u2013 CA Inter Economics Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>37. Foreign Direct Investment In India (FDI):<\/p>\n<ul>\n<li>The most important shift in investment policy occurred when India em-barked upon economic liberalisation and reforms programme in 1991 to raise its growth potential and to integrate it with the world economy.<\/li>\n<li>According to United Nations Conference on Trade and Development (UNCTAD)\u2019s World Investment Report 2016, India ranks as the tenth highest recipient of foreign direct investment globally in 2015 receiving $44 billion of investment that year compared to $35 billion in 2014. In-dia has also moved up by one rank to become the sixth most preferred investment destination.<\/li>\n<li>India received the maximum FDI equity inflows from Mauritius (US$ 5.85 billion) followed by Singapore, Netherlands, Japan and the USA.<\/li>\n<\/ul>\n<p>38. In India, Foreign Investment is Prohibited in the Following Sectors:<\/p>\n<ul>\n<li>Lottery business including Government\/private lottery, online lotteries, etc.<\/li>\n<li>Gambling and betting including casinos etc.<\/li>\n<li>Chit funds<\/li>\n<li>Nidhi company<\/li>\n<li>Trading in Transferable Development Rights (TDRs)<\/li>\n<li>Real Estate Business or Construction of Farm Houses<\/li>\n<li>Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.<\/li>\n<li>Atomic energy and railway operations<\/li>\n<\/ul>\n<p>39. Overseas Direct Investment by Indian Companies:<\/p>\n<ul>\n<li>Outward Foreign Direct Investment (OFDI) from India stood at US$ 1.86 billion in the month of June, 2016.<\/li>\n<li>The overseas investments have been primarily driven by resource seek-ing, market seeking or technology seeking motives.<\/li>\n<li>Many Indian IT firms like Tata Consultancy Services, Infosys, WIPRO, and Satyam acquired global contracts and established overseas offices in developed economies to be close to their key clients.<\/li>\n<li>Overseas investments by Indian companies, especially to acquire energy resources in Australia, Indonesia and Africa.<\/li>\n<li>Indian entrepreneurs are also choosing investment destinations in countries such as Mauritius, Singapore, British Virgin Islands, and the Netherlands on account of higher tax benefits they provide.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>International Trade Notes \u2013 CA Inter Economics Notes\u00a0is designed strictly as per the latest syllabus and exam pattern. International Trade Notes \u2013 CA Inter ECO Notes 1. The Mercantilists\u2019 View of International Trade: Increase exports and collect precious metals in return More gold and silver a country accumulates, the richer it becomes Mercantilism advocated maximizing &hellip;<\/p>\n<p class=\"read-more\"> <a class=\"\" href=\"https:\/\/gstguntur.com\/international-trade-notes-ca-inter-economics-notes\/\"> <span class=\"screen-reader-text\">International Trade Notes \u2013 CA Inter Economics Notes<\/span> Read More &raquo;<\/a><\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":""},"categories":[167],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/17580"}],"collection":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/comments?post=17580"}],"version-history":[{"count":6,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/17580\/revisions"}],"predecessor-version":[{"id":17617,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/17580\/revisions\/17617"}],"wp:attachment":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/media?parent=17580"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/categories?post=17580"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/tags?post=17580"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}