FOREIGN EXCHANGE MARKET
Foreign exchange market is the place where the financial institutions
of different countries come and exchange the currencies in a defined
manner and set rates. In forex market the deals of currencies are done
and in turn it defines the value of one currency in comparison to the
other (remember the hue and cry created about falling of our Rs
against Uncle Sam's dollars).
A foreign investor (FII or FDI) is a major source of foreign currency
in India let us consider a situation, There is a massive downturn in
the USA's economy, an investor with bag full of dollars goes to Forex
market and convert his dollars in to Rupees, then he comes to India to
invest and in turn generate huge amount of profits because of cheap
labour and other resources. He zeroes on Bengal as his site of
operation, but whatever rosy he had heard of India evaporates in a
jiffy, Didi along with her brigade stopped the move and forced the
dollar man out of the state, he shifts his base to other possible
alternative and loose huge amount of money due to leasing of new land,
final settlement of employees in Bengal taking new licenses and
clearances and adding insult to the injury was a 10lakh fine imposed
on him due to environmental issues all these created a Picasso classic
of bad Indian image in the foreign market, in meantime US economy
shows signs of revival so the Dollarman disinvested his chunks of
dollars from India and move towards uncle Sam's backyard, it results
in the loss of dollars in Indian chest.
WHY INDIA NEEDS DOLLAR -
Here is a case in the context -
India has a huge demand of petrol and diesel in their economy, to buy
fuels from Saudi Arabia India needs a currency that Arab accepts (same
as you cannot buy milk by paying wheat anymore). Arab needs dollars to
invest and purchase goods from different countries (dollar is the most
accepted and sought of currency). So Indian oil companies will have to
go to foreign exchange market to buy dollars with rupees.
How the rates are decided-
Now the Indian oil companies go to Forex market to buy dollars for
paying fuel bills but the dollar rich institutes citing the
opportunity will not release their funds this easily, as they don't
need Rs anymore (due to the unsupportive govt, Inflation and scams in
India), The case is same as you fetch a drastically low prices for the
junk lying inactive at your home, So this will lead in to extended
round of negotiations and the past rate of 55Rs (say) against a dollar
will go up to 60Rs a dollar or even more. This will in turn be a
reason for rise of transport of goods in India and the final goods
that used to come for 10Rs in past will jump to 12 or more hence the
prise rise will strike in India leading to inflation.
FEMA(Foreign Exchange Management Act,1999)-
Foreign exchange regulation in India comes under FEMA (previously
FERA) , under this act RBI puts the persons who engage in foreign
exchanges, who holds properties abroad and who makes payment to
offshore countries under the scanner.
DAILY GK UPDATE - 29-30th June
1. PSLV C23 launched successfully from Sriharikotai. It was a 'grand'
exclusive commercial success for the Indian Space Research
Organisation (ISRO), which successfully launched Polar Satellite
Launch Vehicle PSLV-C23 with five foreign satellites into the space
this morning. This has strengthened India's space mission capability
to launch foreign satellites on a commercial basis.
ii. At 9.52 a.m., the ISRO's power horse PSLV roared into the cloudy
sky from the first launch pad here at Satish Dhawan Space Centre SHAR,
Sriharikota. The launch was delayed by three minutes to avoid space
debris.iii. Prime Minister Narendra Modi was ecstatic after watching
the launch (his first after taking over as PM) from the mission
control room along with senior ISRO officials, including Chairman K
Radhakrishnan.
Foreign satellitesThe rocked carried a 714 kg French Earth Observation
Satellite SPOT-7 as the main payload. This satellite was built by
Airbus Defence and Space, a leading European space technology company.
This satellite will be placed diametrically opposite to SPOT-6 and
will form part of the existing observation constellation.It also
carried Germany's 14 kg AISAT (a sea monitoring system), NLS7.1 and
NLS7.2 of Canada (each weighing 15 kg for accurate position control
system) and Singrapore's 7 kg VELOX-1 (for inhouse design of image
2. Malala Yousafzai wins Liberty Medali. A Pakistani girl Malala
Yousafzai has won the Liberty Medal from the National Constitution
Centre in Philadelphia.ii. It's an honour to be awarded the Liberty
Medal, Yousafzai, now 17, said yesterday. I accept this award on
behalf of all the children around the world who are struggling to get
an education.iii. The medal has been awarded annually since 1989,
when Polish Solidarity founder Lech Walesa received it first. Since
then, recipients have included Muhammad Ali, former President Jimmy
Carter, and, last year,
