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Balance of Payments and Foreign Trade - Short Trick

Capital account, the rupee, FERA and FEMA, FDI and FII, exports and the WTO — one sentence each

1 trick sentences1 pairs4 parts
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How to read
  • Guru Ram Each coloured word = one name in the list, shown below in the same colour
  • Panda Two colours in one word = two names
  • ➜ Order the numbered order matters · ⇄ Any order no order
1

Balance of Payments and Foreign Investment

The five parts of the capital account, and how FDI differs from FII.

Trick 1

Five parts of the capital account

⇄ Any order

Nitin lost Ravi’s bat at the fair.

  1. Net Errors and Omissionsthe balancing item
  2. Loanscommercial borrowings + external assistance
  3. Reserve Accountchanges in the forex reserves
  4. Banking Capital TransactionsNRI deposits too
  5. Foreign InvestmentFDI and portfolio (FII)

The current account holds goods, services and income · FDI, FII and foreign loans all sit in the capital account · a current account deficit = more paid out than comes in.

Pairs

FDI and FII — which stays, which runs

1 sentences

Dinesh stayed but Indu ran off.

FDI — Foreign Direct Investment · FII — Foreign Institutional Investment=FDI — a stake of 10% or more, control of the company, long-term and stable · FII — below 10%, profit only, “hot money” · the 10% line dates from 2013

Automatic route — tell the RBI within 30 days · the FIPB was abolished; the ministry concerned now approves · GDRs and ADRs bring foreign money to Indian companies, an IDR lets a foreign company raise money in India · NRE (1970) — rupees, fully repatriable · FCNR-B (15 May 1993) — stays in foreign currency · NRO — limited repatriation, up to $1 million a year.

2

The Exchange Rate and the Law

How the rupee’s exchange rate changed, and FERA to FEMA.

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3

India’s Foreign Trade

Partners and the shape of trade (kept as a note: in English the USA and the UAE share their opening letters).

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4

Export Promotion and the WTO

Asia’s first EPZ, the seven export committees in order, and GATT to the WTO.

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Read the full chapter for the complete notes — a trick helps you remember the list; understanding comes from the notes.