Balance of Payments

Topics: International economics, Currency, Balance of payments Pages: 4 (1234 words) Published: January 31, 2007
Business, Government and International Economy
The business environment of a firm is the totality of external circumstances which the business faces and over which it has little or no control. The business environment of a firm includes 1.Market forces with their associated uncertainty

2.Forces of demand and supply originating from the rest of the world 3.The government policies
4.Nature i.e. the environmental factors

Now, the scenario is changing. Indian market is getting connected to global market: 1.Appreciation of rupee
2.Change in policies. The country turned into an open economy 3.Change in technology
4.India has missed industrial revolution by indulging into services industry. 5.Stock market boom
Above are some of the changes taken place in the past few years in the Indian economy which is making it more close to the international economy.

With the economy opening up globally, trade has been the centre stage of all human development. The dollar, the most vibrant currency of the world has been the common medium of exchange in international trade. Therefore, building up of foreign exchange is imperative for progress of any economy. Indian's position of foreign exchange reserves was seriously jeopardized in the early 90s when it had just $1 billion of foreign exchange. The subsequent liberalization and revaluation of Indian currency has seen a gradual increase in the foreign exchange reserve of the country. Again, it had to be hard to keep up the foreign exchange reserves of the country during the Asian crisis.

Therefore as a manager we see that the position of the foreign exchange depends on how strong the country's international trade is. There are more of exports as compared to imports in addition to other inflows like investment by foreigners of the country. We also came to know that the government has to incur the cost for holding such reserves. Balance of Payments

Balance of Payment is a systematic record of all transactions...
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