International finance

The present revision of this book has to be viewed in the background of the basics on which it was built. Any book on International Finance has to deal with all the components of the International Financial System. So this book started with the present International Financial System vis-a-vis the domestic system financial system as against the real system and the International Monetary Fund, and New International Economic order etc. The new order should bring out the role of emerging market economies like China and India and their new role among the developing countries. These relations among countries are undergoing changes which have to be brought out in this revision. The emerging market economies and among them the Asian developing countries have been called upon to play a more dynamic role in the world economic order. The compo nents and institutions in the International Financial System (IFS) are changing and their role and operations particularly, in relation to India are bound to change with the changing socio-political and economic conditions in the real world. These are incorporated in this revision.

Then the Trade in merchandise and invisibles and capital flows on capital account of balance of payments are the other components of the book. More recently our balance of payments position is comfortable due to high level of reserves and good debt servicing capacity of the country. The invisible trade is growing at a very fast rate in India due to good economic fundamentals of the IT sector and service industries like finance, travel, tourism etc. More recently, BPO service is also growing at a fast rate along with IT enabled services (ITES). An Appendix chapter on OUTSOURCING was therefore added at the end of the book, not to disturb the earlier order in this revision. Besides, the needed changes are made to emphasize the growth of Free Trade Agreements (FTAS) and importance of SEZS and STPs in the latest EXIM policy in India. The importance given to growth of and globalisation of the economy have been brought out in the respective chapters. exports Exports of merchandise and in particular of the invisibles, trade are rising at a faster rate than before. The present financial scenario has to be viewed in the context of the GDP growth at about 8%, and a targeted growth of the manufacturing at 12% on top of a growth of the services sector at more than 9%. International Finance is part of the Financial sector which is growing rapidly at present. Another development is the road map drawn up for the full capital account convertibility. Already, a number of steps were taken to liberalise the capital outflows for investment, mergers and acquisitions, joint ventures, etc., and permission was given for external commercial borrowings and ADRS and GDRS etc. The Government has also allowed inflows liberally through the FDI route in selected sectors and FII for portfolio investments in the capital market and NRI inflows at free market rates along with investments by Persons of Indian Origin and Overseas Corporate Bodies.