Friday, September 28, 2007

Answers to shout-box queries-14

28 Sep 07, 10:34

Sadananda: sir, i have asked earlier hw the value of Rupee is decided u said Market, Which Market & hw. tell me by example

Market, means the foreign exchange market operating in India. You don't see it in a physical form like the Bombay Stock Exchange. It operates in a nebulous way. The market participants in it operate through telephones/fax/telex/internet to conduct their trades.

If more dollars are on offer (for sale), the rupee will rise and vice-versa. The foreign exchange earned by various companies will have to converted into rupees; isn't it? So, they sell those dollars through their banks or directly. Similarly importers will be need of dollars, to pay for the goods and services they import from elsewhere. That is how there will be demand for various foreign currencies and Indian rupees.

But because the dollar is the dominant currency in which many countries prefer to operate their import/export transactions, it effectively works as the reserve currency. There are at least three other currencies which also occupy such a position -- the Euro, the Japanese Yen and the UK Pound sterling.

27 Sep 07, 23:37

neha: sir, what is banda chelva pact all about???

It is the agreement between Sirimavo Bandaranaike, the Sri Lankan Prime Minister and Chelvanayagam, the leader of the Tamil Arasu Katchi in 1957. It was about four major issues:

1. Federal constitution for Sri Lanka.

2. Parity for Tamil and Sinhala languages.

3. Repeal of citizenship laws which discriminated against Tamils in Sri Lanka.

4. Immediate halt to colonization of the Tamil homeland in Sri Lanka.

The Sri Lankan Prime Minister repudiated the agreement in 1958 itself.

See for more of it here.

27 Sep 07, 22:23

rishi: sir what is the meant by Indian Economy's fundamentals

I answered this already know? It is about growth in GDP, substantial domestic savings and having a low inflation. Buoyant taxes, reduced/decreasing deficits etc. We can also add the absorptive capacity of the economy as one more fundamental. If the economy is able to absorb more of capital for productive purposes, it is a sign of strong fundamentals.