B.Com Ist Year International Monetary Fund Short Question Answer Notes

Q.97. Give arguments in favour of privatisation.

Ans. See Page No. 116 and 117.

Q.98. What are the disadvantages of privatisation ?

Ans. See Page No. 118 and 119.

Q.99. What do you understand by Liberalisation ? (Meerut, 2013)

Ans. Liberalisation refers to loosen or remove controls so that economic development gets encouragement. It includes abolition or loosening of those economic policies, rules, regulations, administrative controls and procedures which impede economic development.

Q.100. What is meant by Multinational Corporations ?

Ans. Multinational Corporations (MNCs) refers to a company or industry which spread its business across the national boundries.

Q.101. What is meant by Globalisation ?

Ans. Globalisation means integrating the economy of a country with the world economy. It implies opening up the economy to Toreign direct investment by providing facilities to foreign companies to invest in various fields of economy. In this process bade barriers are reduced so as to permit free flow of goods across national boundaries. 2.

102. What are the main advantages of globalisation?

Ans. See Page No.119 and 120.

Q.103. What are the main objectives of liberalisation ?

Ans. See Page No. 120 and 121.

Q.104. Write the disadvantages of liberalisation.

Ans. See Page No.121.

Q.105. What do you understand by Devaluation ? Write two main objectives of Devaluation.

Ans. Devaluation means deliberately reduction by the government in the value of its national currency in terms of gold or other foreign currencies. Main objectives of devaluation are:

(1) Export promotion,

(2) Reduction in Imports.

Q.106. What are the adverse effects of devaluation ?

Ans. See Page No. 124.

Q.107. What do you understand by ‘Commercial Policy’?

Ans. The policy which is framed to regulate, control and given right direction to foreign trade is termed as commercial policy. Most of the developing countries have facing the problem of deficit in their balance of trade, therefore they have to make efforts to reduce their imports and promote exports. An appropriate and suitable trade policy can help the country to reduce imports, increase exports, encourage import of foreign capital, encourage import substitution, help domestic industry to compete better and protect it against dumping, and administer foreign exchange properly.

Q.108. What are the main types of commercial policy?

Ans. See Page No. 132.

Q.109. What are the main objectives of New Foreign Trade Policy (EXIM Policy)?

Ans. See Page No.126.

Q.110. Write a short note on New EXIM Policy,

Ans. The new foreign trade policy 2009-14 was announced on 27th August 2009. Its duration is from 27th August, 2009 to 31st March, 2014. This policy was announced at a challenging time when entire world was facing severe global recession. India too is badly affected in terms of exports due to contraction of demand (for our goods) in developed countries. The short term objective of new foreign trade policy is to reverse the declining trend of exports and to provide additional support to the sectors which are badly affected due to economic recession. This policy has provided various incentives for export oriented units and has laid special emphasis on exports of agriculture sector, handicrafts, handlooms, gems and jewellery, leather goods, marine sector, sport goods, service sector, etc. Various measures have been proposed for procedural simplification of  foreign trade. Improvement in in infrastructure related to exports will be promoted The new policy will provide stable policy environment conducive for foreign trade. It will emphasise on diversifying exports to new markets. This policy will promote technological upgradation by providing duty free imports of  capital goods and technology. Although this policy does not reflect major departure from earlier five year EXIM policy 2004-09,But its focus is on making our exports globally competitive and promoting economic growth through foreign trade.

Q.111. Explain the meaning of Export Oriented Unit (EOU).

Ans. The units which undertake to export their ende production are termed as EOUS. Trading units are not covered under this scheme. These units can import all types of goods including capital goods required for their activities without payment of any custom duty. The units set up as EOUs are entitled to following concessions:

• Reimbursement of Central Sales Tax(CST).
• Exemption from payment of excise duty.
• Refund of Service Tax paid.

(iv) Exemption from Income Tax till 31st March, 2012. (v) Exemption from industrial licensing for manufacture of items reserved for small scale industries.

Q.112. What do you mean by Free Trade and Warehousing Zone (FTWZ)?

Ans. Government started a scheme named ‘Free Trade and Warehousing Zones’ in EXIM policy 2004-09. This scheme is aimed at making India a global trading centre. In this scheme, 100% FDI (Foreign Direct Investment) is allowed for setting up these warehousing zones. Each zone will have a minimum outlay of Rs. 100 crore and built-up area of 5 lakh square metres. In these zones, there is freedom to carry-out import and export transactions. These zones qualify for all benefits offered to special economic zones. Under this scheme an Indian trader can buy goods from any country, store them in a warehouse in FTWZ and sell these goods to buyers anywhere in the world. In these zones, import and export will be duty-free.

Q.113. What facilities are provided to Special Economic Zones (SEZs)?

Ans. The special economic zones (SEZs) are set up to boost exports of the country. In these zones infrastructure of international quality will be set up. Units set up in SEZs will get income tax concessions, exemption from custom and excise duties, etc. The Special Economic Zone Bill was passed by parliament in June 2005. So far 377 SEZs have been notified by the government, out of these 130 SEZs have become fully operational by 31st December 2010.

Q.114. What do you mean by Export House and Trading House?

Ans. On the basis of export performance during current year and previous three years taken together the export houses are categorised as follows:

Status Category	Total Export Performance
Export House	20
Star Export House	100
Trading House	500
Star Trading House	2,500
Premier Trading House	7,500

Such status houses are eligible for exemption from furnishing bank gaurantee, get fast clearance of export-import documents, tax concessions, etc.

Q.115. Explain Export Promotion Capital Goods (EPCG) Scheme.

Ans. This scheme is of two types:

(i) Zero Duty EPCG Scheme : It allows import of capital goods at zero percent custom duty subject to an export obligation equivalent to six times of duty saved on capital goods imported under this scheme. This export obligation is to be fulfilled in six years. This scheme is applicable on engineering goods, electronic products, chemicals, textiles, handicrafts, sports goods, marine products, paper, ceramic products, toys and leather goods.

(ii) 3% Duty EPCG Scheme: It allows import of capital goods at 3% custom duty subject to an export obligation equivalent to eight times of duty saved on capital goods imported under this scheme. This export obligation is to be fulfilled in eight years. This scheme is applicable on those capital goods which do not fall under zero duty EPCG Scheme.

B.Com Ist Year International Monetary Fund Short Question Answer Notes

Q.116. What do you understand by Market Development AS sistance (MDA)?

Ans. Market Development Assistance (MDA) is provide exporters for developing markets in the nations covered under ‘focus Market Scheme’. Under this scheme, financial assistance is provided for attending international trade fairs, seminars, conference, etc.

Q.117. What facilities have been provided to Status Holder Exporters ?

Ans. Status Holder Exporters, i.e. exporters who have export of Rs. 15 crore or more in a year, will be entitled to duty credit of 1% of exports made during the year 2009-10, 2010-11 and 2011-12. These exporters will also be entitled to incentives and concessions rovided to them under earlier EXIM policy. Approximately ouro India’s goods’ exports are contributed by Status Holder Exporters.

Q.118. What is meant by Foreign Capital?

Ans. Foreign capital is the investment of capital by a foreign government, institution, private individual, international organisation in a country. Foreign capital includes foreign aid, commercial borrowings and foreign investment. Foreign aid may be in the form of foreign grants, concessional loans, etc. Foreign capital is invested in the form of foreign currency, foreign machines and foreign technical know-how. Foreign capital has many forms, viz. foreign collaboration, loan in the form of foreign currency, investments in equity capital, etc. Many foreign institutions and governments give grants. The main difference between foreign grants and loans is that loans are repaid with interest, whereas grants are not repaid.