1. If India exports more than it imports, which of the following is likely to happen?
Write Comment
Comments
By: anil on 05 May 2019 02.39 am
If India starts exporting more than it imports, the current account would be in surplus (foreign currencies flowing into the current account, which constitutes all the trades in goods and services, would be more than foreign currencies flowing out).
This may or may not lead to a strengthening of Rupee Vs foreign currencies, depending on how the capital account is behaving, that is, if the foreign currencies in terms of investments, portfolio and direct, are flowing in or out.
However, as a rule of thumb, if the current account is in huge surplus (like say China), our currency should appreciate. Dollars would be cheaper. Also, a positive current account would build in the sentiments of capital and forex markets and more forex would pour in. This might have a domino effect.
In the end, the currency would strengthen (theoretically) to an extent where our exports would be too costly and imports would be cheap, and the balance is restored.
Terms And Service:We do not guarantee the accuracy of available data ..We Provide Information On Public Data.. Please consult an expert before using this data for commercial or personal use
This may or may not lead to a strengthening of Rupee Vs foreign currencies, depending on how the capital account is behaving, that is, if the foreign currencies in terms of investments, portfolio and direct, are flowing in or out.
However, as a rule of thumb, if the current account is in huge surplus (like say China), our currency should appreciate. Dollars would be cheaper. Also, a positive current account would build in the sentiments of capital and forex markets and more forex would pour in. This might have a domino effect.
In the end, the currency would strengthen (theoretically) to an extent where our exports would be too costly and imports would be cheap, and the balance is restored.