Financing of the external payments deficit, Macroeconomics

Assignment Help:

Financing of the external payments deficit:

The trend  in India's widening CAD during the second half of  the eighties, both in absolute terms and also as a proportion of the GDP, increased the need for securing  an adequate flow of external finances. This was crucial to prevent the country from being forced to accept further cuts in the flow of imports from abroad. The situation  needs to be viewed in terms ofthe  prevailing state of  the country's external indebtedness and the potential of her future borrowings by the end of the eighties. The table below presents the scenario obtained in this regard.  

External finance could in principle be  availed of from multilateral official sources brimarily IMF), external commercial borrowings including supplier credit, NRI deposits on a short-term basis and, finally, by preventing herself  from further depletions,  from the  country's foreign exchange reserves. Of these, the net flows of finance from the IMF had already become negative'  by  1985-86. The other sources of external finance (including both corporate borrowings and NRIs  at  commercial  terms), began  to acquire significance only by the early nineties.

Notwithstanding the steady rise in gross authorisations of ECBs since the beginning of the eighties, net disbursements was slow to  follow during the period  1985-86 to  1988-89. In  the meantime, debt servicing on ECBs moved  up  steadily, and the  authorised ECB credit maintained an upward trend over the period. In sum therefore, the situation  by the  end  of  1980s was one in which the debt charges  (interest  and arnartisations) increased at a faster rate than gross disbursements of external loans.  

 


Related Discussions:- Financing of the external payments deficit

A good is classified as inferior, a good is classified as inferior if a....

a good is classified as inferior if a. consumers buy less when the price rises b. consumers buy less when the income rises c. consumers buy less when the price falls d.

Illustrate an example of consumer price index, Illustrate an example of Con...

Illustrate an example of Consumer Price Index For instance, if we spend twice as much on apples as on pears, apples would have twice the weight in basket. The precise details o

Damaging to the economy, Why do financial crises occur and why are they so ...

Why do financial crises occur and why are they so damaging to the economy?

How much money can banks create, How much money can banks create? Does...

How much money can banks create? Does this mean that banks can create an unlimited amount of money? The answer is no - that would require them to lend an unlimited amount of m

Business cycles, Business Cycles  Economic growth is not a continuous p...

Business Cycles  Economic growth is not a continuous process. Superimposed on the long-term trends are short-term fluctuations in the levels of economic activity and\or in grow

Optimal order size, A major component of the costs of many large firms  is ...

A major component of the costs of many large firms  is the cost associated with ordering and holding inventory. If the yearly demand for the good is  D and the size of each order p

Reducing the budget deficit, Reducing the budget deficit by cutting governm...

Reducing the budget deficit by cutting government spending could conceivably: A. increase income if interest rates rise enough and government spending is more productive than priva

Concept of amximization and assumptions associated the econo, PREPARE AN ES...

PREPARE AN ESSAY ON THE CONCEPT OF MAXIMIZATION AND THE ASSUMPTIONS ASSOCIATED WITH THE BEHAVIOR OF THE ECONOMIC MAN

Stages and various coordination mechanisms involved in polic, explain the s...

explain the stages and various coordination mechanisms involved in policy processes.

Problems of measuring productivity in actual work situations, Discuss the p...

Discuss the problems of measuring productivity in actual work situations. Also how productivity might be measured for each of the following industries? Finance and insurance (examp

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd