INTRODUCTION:

For as long as there has been international trade, there has been international
finance. When an Egyptian merchant wished to import fine fabrics from
Babylon, he had to exchange his currency for the exporter, or pay in a mutually
acceptable currency. The former would represent the elements of a foreign
exchange market; the latter, a commonly accepted vehicle currency. If the
exporter allowed the Egyptian merchant to defer payment, an international
extension of credit had taken place.The present international capital market,
however, has its roots in the nineteenth century proliferation of stocks and
bonds that were issued in the American, China, and other countries, for sale in
Europe. Most of these financed the railroads, canals, and other infrastructure
projects in what were then the developing countries. Not only were these
financings essential to the development of the United States, Australia, and
other nations, but the instruments and the problems stemming from them gave
rise to a set of norms and laws governing private international finance.
Simultaneously governments were experimenting with paper money and the
gold exchange standard, whereby currencies values were fixed by the
willingness of governments to offer gold in exchange for a fixed amount of
paper currency. But the system proved somewhat rigid, and in the early
twentieth century costly lessons were learned in the arena of public monetary
policy, culminating in the Great Depression and the competitive devaluation of
currencies in the 1930s.


By 1944, toward the end of World War II, the allied leaders were weary of war,
economic and otherwise. At a famous meeting at Bertton Woods, New
Hampshire, they established some fundamental rules aimed at stabilizing
international monetary relations. The core of the agreement that was hammered
out contained two key elements:


1) To facilitate trade, governments should insofar as possible allow people to
freely convert one currency into another.

2) To forestall the use of currency exchange rates to gain a temporary export
advantage, governments should fix their currencies external values, using the
U.S. dollar as the keystone unit.


By the late 1960s this dollar standard came under strain as a result of U.S
inflation and the general divergence of monetary policies among the industrial
countries, and in 1971 the U.S. dollar was officially devalued. Two decades of
floating exchanges rates ensured, until by the early 1980s, with vast capital
flows driving currencies far from their perceived fundamental values,
governments began to yearn for the external monetary discipline that fixed
exchange rates offer.

Closer to the end of World War II, the Bretton Woods agreement was signed as
the initiative of the USA in July 1944. The Bretton Woods Conference rejected
John Maynard Keynes suggestion for a new world reserve currency in favor of a
system built on the US dollar. Other international institutions such as the IMF,
the World Bank and GATT (General Agreement on Tariffs and Trade) were
created in the same period as the emerging victors of WW2 searched for a way
to avoid the destabilizing monetary crises which led to the war. The Bretton
Woods agreement resulted in a system of fixed exchange rates that partly
reinstated the gold standard, fixing the US dollar at USD35/oz and fixing the
other main currencies to the dollar - and was intended to be permanent. The
Bretton Woods system came under increasing pressure as national economies
moved in different directions during the sixties. A number of realignments kept
the system alive for a long time, but eventually Bretton Woods collapsed in the
early seventies following president Nixon's suspension of the gold convertibility
in August 1971. The dollar was no longer suitable as the sole international
currency at a time when it was under severe pressure from increasing US budget
and trade deficits.
The following decades have seen foreign exchange trading develop into the
largest global market by far. Restrictions on capital flows have been removed in
most countries, leaving the market forces free to adjust foreign exchange rates
according to their perceived values. But the idea of fixed exchange rates has by
no means died. The EEC (European Economic Community) introduced a new
system of fixed exchange rates in 1979, the European Monetary System. This
attempt to fix exchange rates met with near extinction in 1992-93, when pent-up
economic pressures forced devaluations of a number of weak European
currencies. Nevertheless, the quest for currency stability has continued in
Europe with the renewed attempt to not only fix currencies but actually replace
many of them with the Euro in 2001.

The lack of sustainability in fixed foreign exchange rates gained new relevance
with the events in South East Asia in the latter part of 1997, where currency
after currency was devalued against the US dollar, leaving other fixed exchange
rates, in particular in South America, looking very vulnerable. But while
commercial companies have had to face a much more volatile currency
environment in recent years, investors and financial institutions have found a
new playground. The size of foreign exchange markets now dwarfs any other
investment market by a large factor. It is estimated that more than USD 3,000
billion is Forex (Foreign Exchange) is the international financial market used
for trade of world currencies. It has been working since 70s of the 20th century -
from the moment when the biggest world nations decided to switch from fixed
exchange rates to floating ones.Daily volume of Forex trade exceeds 4 trillion
United States dollars, and this number is always growing.Main currency for
Forex operations is the United States dollar (USD).
Main Forex market participants:

- Central banks of countries;
- Commercial banks;
- Investing banks;
- Brokers, dealers;
- Pension funds;
- Insurance companies;
- International corporations;
- Individuals.
Banks:
The interbank market caters for both the majority of commercial turnover and
large amounts of speculative trading every day. A large bank may trade billions
of dollars daily. Some of this trading is undertaken on behalf of customers, but
much is conducted by proprietary desks, trading for the bank's own account.
Until recently, foreign exchange brokers did large amounts of business,
facilitating interbank trading and matching anonymous counterparts for small
fees. Today, however, much of this business has moved on to more efficient
electronic systems. The broker squawk box lets traders listen in on ongoing
interbank trading and is heard in most trading rooms, but turnover is noticeably
smaller than just a few years ago.

Commercial companies:
An important part of this market comes from the financial activities of
companies seeking foreign exchange to pay for goods or services. Commercial
companies often trade fairly small amounts compared to those of banks or
speculators, and their trades often have little short term impact on market rates.
Nevertheless, trade flows are an important factor in the long-term direction of a
currency's exchange rate. Some multinational companies can have an
unpredictable impact when very large positions are covered due to exposures
that are not widely known by other market participants.

Central banks:
National central banks play an important role in the foreign exchange markets.
They try to control the money supply, inflation, and/or interest rates and often
have official or unofficial target rates for their currencies. They can use their
often substantial foreign exchange reserves to stabilize the market. Milton
Friedman argued that the best stabilization strategy would be for central banks
to buy when the exchange rate is too low, and to sell when the rate is too high
that is, to trade for a profit based on their more precise information.
Nevertheless, the effectiveness of central bank "stabilizing speculation" is
doubtful because central banks do not go bankrupt if they make large losses,
like other traders would, and there is no convincing evidence that they do make
a profit trading.

Hedge funds as speculators:
About 70% to 90% of the foreign exchange transactions are speculative. In
other words, the person or institution that bought or sold the currency has no
plan to actually take delivery of the currency in the end; rather, they were solely
speculating on the movement of that particular currency. Hedge funds have
gained a reputation for aggressive currency speculation since 1996. They
control billions of dollars of equity and may borrow billions more, and thus may
overwhelm intervention by central banks to support almost any currency, if the
economic fundamentals are in the hedge funds' favor.
Investment management firms:
Investment management firms (who typically manage large accounts on behalf
of customers such as pension funds and endowments) use the foreign exchange
market to facilitate transactions in foreign securities. For example, an
investment manager bearing an international equity portfolio needs to purchase
and sell several pairs of foreign currencies to pay for foreign securities
purchases.
Retail foreign exchange brokers:
Retail traders (individuals) constitute a growing segment of this market, both in
size and importance. Currently, they participate indirectly through brokers or
banks. Retail brokers, while largely controlled and regulated in the USA by the
CFTC and NFA have in the past been subjected to periodic foreign exchange
scams. To deal with the issue, the NFA and CFTC began imposing stricter
requirements, particularly in relation to the amount of Net Capitalization
required of its members. As a result many of the smaller, and perhaps
questionable brokers are now gone.
There are two main types of retail FX brokers offering the opportunity for
speculative currency trading: brokers and dealers or market makers. Brokers
serve as an agent of the customer in the broader FX market, by seeking the best
price in the market for a retail order and dealing on behalf of the retail customer.
They charge a commission or mark-up in addition to the price obtained in the
market. Dealers or market makers, by contrast, typically act as principal in the
transaction versus the retail customer, and quote a price they are willing to deal
atthe customer has the choice whether or not to trade at that price.
Non-bank foreign exchange companies:
Non-bank foreign exchange companies offer currency exchange and
international payments to private individuals and companies. These are also
known as foreign exchange brokers but are distinct in that they do not offer
speculative trading but currency exchange with payments. I.e., there is usually a
physical delivery of currency to a bank account. Send Money Home offer an in-
depth comparison into the services offered by all the major non-bank foreign
exchange companies.


HISTORY OF FOREX:

Early 20th Century:

Only in the 20th century paper money start regular circulation. This happened
by force of legislation, the efforts of central banks to manage money supplies,
and government control of gold supplies.Within a country, this fiat money is as
good as any other form. Internationally, it is not. International trade has always
demanded a money standard accepted everywhere.Gold and silver provided
such a standard for centuries. An official Gold Standard regulated the value of
money for about a century, prior to the start of World War I in 1914.

1929:

The dollar has been perceived as more of a has-been, due to the Stock Market
Crash and the subsequent Great Depression.

1930:

The Bank for International Settlements (BIS) was established in Basel,
Switzerland. Its goals were to oversee the financial efforts of the newly
independent countries, along with providing monetary relief to countries with
temporary balance of payments difficulties.

1931:
The Great Depression, combined with the suspension of Gold Standard, created
a serious diminution in foreign exchange dealings.

World War II:
Before World War II, currencies around the world were quoted against the
British Pound. World War II crashed the Pound. The only country unscarred by
the war was the US. The US dollar became the prominent currency of the entire
world.

1944:
The United National Monetary and Financial Conference at Bretton Woods,
New Hampshire discussed the financial future of the post-war world. The major
Western Industrialized nations agreed to a pegging of the US Dollar, which in
turn was pegged at $35.00 to the troy ounce of gold. The future was designed to
be stable, in part due to the tight governmental controls on currency values. The
US dollar became the worlds reserve currency.
1957:

The European Economic Community was established.

1967:

At the IMF meeting in Rio de Janeiro, the Special Drawing Rights (SDRs) were
created. SDRs are international reserve assets created and allocated by the IMF
to supplement the existing reserve assets.




1971:

The Smithsonian Agreement, reached in Washington, D.C., had a transitional
role to the free floating markets. The ranges of currencies fluctuations relative
to the US dollar were increased from 1 percent to 4.5 percent band. The range
of currencies fluctuating against each other was increased up to 9 percent. As a
parallel, the European Economic Community tried to move away from the US
dollar block toward the Deutsche Mark block, by designing its own European
Monetary System.
In the summer of 1971, President Nixon took the United States off the gold
standard, and floating exchange rates began to materialize.

1972:

West Germany, France, Italy, the Netherlands, Belgium and Luxembourg
developed the European Joint Float. Member currencies were allowed to
fluctuate within 2.25 percent band (the snake), against each other and 4.5
percent band (the tunnel) against the USD.

1973:

The Smithsonian Institution Agreement and the European Joint Float systems
collapsed under heavy market pressures. Following the second major
devaluation in the US dollar, the fixed-rate mechanism was totally discarded by
the US Government and replaced by The Floating Rate.

1978:

The International Monetary Fund officially mandated free currency floating.

1979:
The European Monetary System was established.


1999:

January 1st, 1999, the Euro makes its official appearance within the countries
members of the European Union.

2002:

January 1st, 2002, the Euro becomes the only currency and replaces all other
twelve national currencies within the European Union and Monetary Market:
Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg,
Netherlands, Austria, Portugal and Finland.

TODAY:

Today, supply and demand for a particular currency, or its relative value, is the
driving factors in determining exchange rates. Decreasing obstacles and
increasing opportunities, such as the fall of communism and the dramatic
growth of the Asian and Latin American economies, have created new
opportunities for investors. Increasingly vast amounts of foreign currencies
began flowing into other countries banks.




The Market Hours:

The trading begins once the markets are officially open in Tokyo, Japan at 7:00
PM Sunday, New York time. Afterwards, at 9:00 PM EST, Singapore and Hong
Kong opens followed by the European markets in Frankfurt at 2:00 AM and in
London at 3:00 AM. When the clock reaches 4:00 AM, the European markets
are in the hot spot and Asia just concluded its trading day. Around 8:00 AM on
Monday, the US markets opens in New York while Europe is slowly going
down. Australia will take the lead around 5:00 PM and when it is 7:00PM again,
Tokyo is ready to reopen.





Major Currencies:

US Dollar The United States dollar is the worlds main currency a universal
measure to evaluate any other currency traded on Forex. All currencies are
generally quoted in US dollar terms. Under conditions of international
economic and political unrest, the US dollar is the main safe-haven currency,
which was proven particularly well during the Southeast Asian crisis of 1997-
1998.As it was indicated, the US dollar became the leading currency toward the
end of the Second World War along the Bretton Woods Accord, as the other
currencies were virtually pegged against it. The introduction of the Euro in 1999
reduced the dollars importance only marginally. The other major currencies
traded against the US dollar are the Euro, Japanese Yen, British Pound and the
Swiss Franc.











































COUNTRY PROFILE:


ECONOMY OF INDIA:

The economy of India is the twelfth largest economy in the world by nominal
value

and the fourth largest by purchasing power parity (PPP)In the 1990s,
following economic reform from the socialist-inspired economy of post-
independence India, the country began to experience rapid economic growth, as
markets opened for international competition and investment. In the 21st
century, India is an emerging economic power with vast human and natural
resources, and a huge knowledge base. Economists predict that by 2020

India
will be among the leading economies of the world.
India was under social democratic-based policies from 1947 to 1991. The
economy was characterised by extensive regulation, protectionism, and public
ownership, leading to pervasive corruption and slow growth

.Since 1991,
continuing economic liberalisation has moved the economy towards a market-
based system.A revival of economic reforms and better economic policy in
2000s accelerated India's economic growth rate. By 2008, India had established
itself as the world's second-fastest growing major economy

However, the year
2009 saw a significant slowdown in India's official GDP growth rate to 6.1% as
well as the return of a large projected fiscal deficit of 10.3% of GDP which
would be among the highest in the world. India's large service industry accounts
for 62.6% of the country's GDP while the industrial and agricultural sector
contribute 20% and 17.5% respectively. Agriculture is the predominant
occupation in India, accounting for about 52% of employment. The service
sector makes up a further 34%, and industrial sector around 14%. The labor
force totals half a billion workers. Major agricultural products include rice,
wheat, oilseed, cotton, jute, tea, sugarcane, potatoes, cattle, water buffalo,
sheep, goats, poultry and fish. Major industries include telecommunications,
textiles, chemicals, food processing, steel, transportation equipment, cement,
mining, petroleum, machinery, information technology enabled services and
software.AS India's per capita income (nominal) is $1032, ranked 139th in the
world, while its per capita (PPP) of US$2,932 is ranked 128th.Previously a
closed economy, India's trade has grown fast. India currently accounts for 1.5%
of World trade as of 2007 according to the WTO. According to the World Trade
Statistics of the WTO in 2006, India's total merchandise trade (counting exports
and imports) was valued at $294 billion in 2006 and India's services trade
inclusive of export and import was $143 billion. Thus, India's global economic
engagement in 2006 covering both merchandise and services trade was of the
order of $437 billion, up by a record 72% from a level of $253 billion in 2004.
India's trade has reached a still relatively moderate share 24% of GDP in 2006,
up from 6% in 1985.
Despite robust economic growth, India continues to face many major problems.
The recent economic development has widened the economic inequality across
the country. Despite sustained high economic growth rate, approximately 80%
of its population lives on less than $2 a day (PPP). Even though the arrival of
Green Revolution brought end to famines in India, 40% of children under the
age of three are underweight and a third of all men and women suffer from
chronic energy deficiency.
Indian economic policy after independence was influenced by the colonial
experience (which was seen by Indian leaders as exploitative in nature) and by
those leaders' exposure to Fabian socialism. Policy tended towards
protectionism, with a strong emphasis on import substitution, industrialization,
state intervention in labor and financial markets, a large public sector, business
regulation, and central planning. Five-Year Plans of India resembled central
planning in the Soviet Union. Steel, mining, machine tools, water,
telecommunications, insurance, and electrical plants, among other industries,
were effectively nationalized in the mid-1950s. Elaborate licences, regulations
and the accompanying red tape, commonly referred to as Licence Raj, were
required to set up business in India between 1947 and 1990.
Jawaharlal Nehru, the first prime minister, along with the statistician Prasanta
Chandra Mahalanobis, carried on by Indira Gandhi formulated and oversaw
economic policy. They expected favorable outcomes from this strategy, because
it involved both public and private sectors and was based on direct and indirect
state intervention, rather than the more extreme Soviet-style central command
system.
]
The policy of concentrating simultaneously on capital- and technology-
intensive heavy industry and subsidizing manual, low-skill cottage industries
was criticized by economist Milton Friedman, who thought it would waste
capital and labour, and retard the development of small manufacturers. The rate
from 194780 was derisively referred to as the Hindu rate of growth, because of
the unfavourable comparison with growth rates in other Asian countries,
especially the "East Asian Tigers".

In the late 80s, the government led by Rajiv Gandhi eased restrictions on
capacity expansion for incumbents, removed price controls and reduced
corporate taxes. While this increased the rate of growth, it also led to high fiscal
deficits and a worsening current account. The collapse of the Soviet Union,
which was India's major trading partner, and the first Gulf War, which caused a
spike in oil prices, caused a major balance-of-payments crisis for India, which
found itself facing the prospect of defaulting on its loans. India asked for a $1.8
billion bailout loan from IMF, which in return demanded reforms.
In response, Prime Minister Narasimha Rao along with his finance minister Dr.
Manmohan Singh initiated the economic liberalisation of 1991. The reforms did
away with the Licence Raj (investment, industrial and import licensing) and
ended many public monopolies, allowing automatic approval of foreign direct
investment in many sectors. Since then, the overall direction of liberalisation
has remained the same, irrespective of the ruling party, although no party has
tried to take on powerful lobbies such as the trade unions and farmers, or
contentious issues such as reforming labour laws and reducing agricultural
subsidies. Since 1990 India has emerged as one of the fastest-growing
economies in the developing world; during this period, the economy has grown
constantly, but with a few major setbacks. This has been accompanied by
increases in life expectancy, literacy rates and food security.
While the credit rating of India was hit by its nuclear tests in 1998, it has been
raised to investment level in 2007 by S&P and Moody's. In 2003, Goldman
Sachs predicted that India's GDP in current prices will overtake France and Italy
by 2020, Germany, UK and Russia by 2025 and Japan by 2035. By 2035, it was
projected to be the third largest economy of the world, behind US and China. In
2009 India purchased 200 Tons of Gold for $6.7 billion from IMF as a total role
reversal from 1991.
Industry and services:
Industry accounts for 54.6% of the GDP and employ 17% of the total
workforce. However, about one-third of the industrial labour force is engaged in
simple household manufacturing only. In absolute terms, India is 16th in the
world in terms of nominal factory output. India's small industry makes up 5% of
carbon dioxide emissions in the world.

Textile manufacturing is the second largest source for employment after
agriculture and accounts for 26% of manufacturing output. Tirupur has gained
universal recognition as the leading source of hosiery, knitted garments, casual
wear and sportswear.
India is fifteenth in services output. It provides employment to 23% of work
force, and it is growing fast, growth rate 7.5% in 19912000 up from 4.5% in
195180. It has the largest share in the GDP, accounting for 55% in 2007 up
from 15% in 1950.
Business services (information technology, information technology enabled
services, business process outsourcing) are among the fastest growing sectors
contributing to one third of the total output of services in 2000. The growth in
the IT sector is attributed to increased specialization, and an availability of a
large pool of low cost, but highly skilled, educated and fluent English-speaking
workers, on the supply side, matched on the demand side by an increased
demand from foreign consumers interested in India's service exports, or those
looking to outsource their operations. The share of India's IT industry to the
country's GDP increased from 4.8 % in 2005-06 to 7% in 2008. In 2009, seven
Indian firms were listed among the top 15 technology outsourcing companies in
the world. In March 2009, annual revenues from outsourcing operations in India
amounted to US$60 billion and this is expected to increase to US$225 billion by
2020. Tourism in India is relatively undeveloped, but growing at double digits.
Some hospitals woo medical tourism.
Agriculture:
Farmers work inside a rice field in Andhra Pradesh. India is the second largest
producer of rice in the world after China and Andhra Pradesh is the 2nd largest
rice producing state in India with West Bengal being the largest.India ranks
second worldwide in farm output. Agriculture and allied sectors like forestry,
logging and fishing accounted for 16.6% of the GDP in 2007, employed 60% of
the total workforce and despite a steady decline of its share in the GDP, is still
the largest economic sector and plays a significant role in the overall socio-
economic development of India.India is the largest producer in the world of
milk, cashew nuts, coconuts, tea, ginger, turmeric and black pepper. It also has
the world's largest cattle population: 193 million. It is the second largest
producer of wheat, rice, sugar, cotton, silk, peanuts and inland fish. It is the
third largest producer of tobacco. India is the largest fruit producer, accounting
for 10% of the world fruit production

Banking and finance:
The Indian money market is classified into: the organised sector (comprising
private, public and foreign owned commercial banks and cooperative banks,
together known as scheduled banks); and the unorganised sector (comprising
individual or family owned indigenous bankers or money lenders and non-
banking financial companies (NBFCs). The unorganised sector and microcredit
are still preferred over traditional banks in rural and sub-urban areas, especially
for non-productive purposes, like ceremonies and short duration loans.
Natural resources:
India has the world's fifth largest wind power industry, with an installed wind
power capacity of 9,587 MW. Shown here is a wind farm in Muppandal, Tamil
Nadu.India's total cultivable area is 1,269,219 km (56.78% of total land area),
which is decreasing due to constant pressure from an ever growing population
and increased urbanisation. India has a total water surface area of 314,400 km
and receives an average annual rainfall of 1,100 mm. Irrigation accounts for
92% of the water utilisation, and comprised 380 km in 1974, and is expected to
rise to 1,050 km by 2025, with the balance accounted for by industrial and
domestic consumers.India's major mineral resources include coal, iron,
manganese, mica, bauxite, titanium, chromite, limestone and thorium. India
meets most of its domestic energy demand through its 92 billion tonnes of coal
reserves.
Petroleum and Natural gas:
ONGC platform at Bombay High in the Arabian Sea. As of 2010, India is the
world's fifth largest consumer of oil.India's oil reserves, found in Bombay High,
parts of Gujarat, Rajasthan and eastern Assam, meet 25% of the country's
domestic oil demand. India's total proven oil reserves stand at 11 billion barrels,
of which Bombay High is believed to hold 6.1 billion barrels and Mangala Area
in Rajasthan an additional 3.6 billion barrels.In 2009, India imported 2.56
million barrels of oil per day, making it one of largest buyers of crude oil in the
world. The petroleum industry in India mostly consists of public sector
companies such as Oil and Natural Gas Corporation (ONGC), Hindustan
Petroleum Corporation Limited (HPCL) and Indian Petrochemicals Corporation
Limited (IPCL). There are some major private Indian companies in oil sector
such as Reliance Industries Limited (RIL) which operates the world's largest oil
refining complex.
Pharmaceuticals:
India has a self reliant Pharmaceuticals industry. The majority of its medical
consumables are produced domestically. Pharmaceutical Industry in India is
dotted with companies like Ranbaxy Laboratories, Dr. Reddy's Laboratories,
Cipla which have created a niche for themselves at world level.
External trade and investment:
In March 2008, India's annual imports and exports stood at US$236 and
US$155.5 billion respectively. Shown here is the cargo of a container ship being
unloaded at the Jawaharlal Nehru Port, Navi Mumbai.
Since liberalization, the value of India's international trade has become more
broad-based and has risen to Rs. 63,080,109 crores in 200304 from Rs.1,250
crores in 195051. India's major trading partners are China, the US, the UAE,
the UK, Japan and the EU. The exports during April 2007 were $12.31 billion
up by 16% and import were $17.68 billion with an increase of 18.06% over the
previous year. In 2006-07, major export commodities included engineering
goods, petroleum products, chemicals and pharmaceuticals, gems and jewellery,
textiles and garments, agricultural products, iron ore and other minerals. Major
import commodities included crude oil and related products, machinery,
electronic goods, gold and silver.
India is a founding-member of General Agreement on Tariffs and Trade
(GATT) since 1947 and its successor, the WTO. While participating actively in
its general council meetings, India has been crucial in voicing the concerns of
the developing world. For instance, India has continued its opposition to the
inclusion of such matters as labour and environment issues and other non-tariff
barriers into the WTO policies.
Balance of payments:
Since independence, India's balance of payments on its current account has been
negative. Since liberalisation in the 1990s (precipitated by a balance of payment
crisis), India's exports have been consistently rising, covering 80.3% of its
imports in 200203, up from 66.2% in 199091. India's growing oil import bill
is seen as the main driver behind the large current account deficit. In 2007-08,
India imported 120.1 million tonnes of crude oil, more than 3/4th of the
domestic demand, at a cost of $61.72 billion.

Foreign direct investment in India:
India has strengths in telecommunication, information technology and other
significant areas such as auto components, chemicals, apparels,
pharmaceuticals, and jewellery. Despite a surge in foreign investments, rigid
FDI policies resulted in a significant hindrance. However, due to some positive
economic reforms aimed at deregulating the economy and stimulating foreign
investment, India has positioned itself as one of the front-runners of the rapidly
growing Asia Pacific Region. India has a large pool of skilled managerial and
technical expertise. The size of the middle-class population stands at 300
million and represents a growing consumer market. FDI inflows into India
reached a record $19.5 billion in fiscal year 2006-07 (April-March), according
to the government's Secretariat for Industrial Assistance. This was more than
double the total of US$7.8bn in the previous fiscal year. The FDI inflow for
2007-08 has been reported as $24 billion and for 2008-09, it is expected to be
above $35 billion. A critical factor in determining India's continued economic
growth and realizing the potential to be an economic superpower is going to
depend on how the government can create incentives for FDI flow across a
large number of sectors in India.
Currency:
The Indian rupee is the only legal tender accepted in India. The exchange rate as
on 23 March 2010 is 45.40 INR the USD, 61.45 to a EUR, and 68.19 to a GBP.
The Indian rupee is accepted as legal tender in the neighboring Nepal and
Bhutan, both of which peg their currency to that of the Indian rupee. The rupee
is divided into 100 paise. The highest-denomination banknote is the 1,000 rupee
note; the lowest-denomination coin in circulation is the 25 paise coin (it earlier
had 1, 2, 5, 10 and 20 paise coins which have been discontinued by the Reserve
Bank of India).
Income and consumption:
According to Times of India, "a majority of Indians have per capita space
equivalent to or less than a 10 feet x 10 feet room for their living, sleeping,
cooking, washing and toilet needs." and "one in every three urban Indians lives
in homes too cramped to exceed even the minimum requirements of a prison
cell in the US." The average is 103 sq ft (9.6 m
2
) per person in rural areas and
117 sq ft (10.9 m
2
) per person in urban areas.

Employment:
Agricultural and allied sectors accounted for about 60% of the total workforce
in 2003 same as in 199394. While agriculture has faced stagnation in growth,
services have seen a steady growth. Of the total workforce, 8% is in the
organised sector, two-thirds of which are in the public sector. The NSSO survey
estimated that in 19992000, 106 million, nearly 10% of the population were
unemployed and the overall unemployment rate was 7.3%, with rural areas
doing marginally better (7.2%) than urban areas (7.7%). India's labor force is
growing by 2.5% annually, but employment only at 2.3% a year.
Economic trends:
India's 300 million strong middle-class population is growing at an annual rate
of 5%. Shown here is a residential area in the Mumbai metropolitan area.
In the revised 2007 figures, based on increased and sustaining growth, more
inflows into foreign direct investment, Goldman Sachs predicts that "from 2007
to 2020, Indias GDP per capita in US$ terms will quadruple", and that the
Indian economy will surpass the United States (in US$) by 2043. In spite of the
high growth rate, the report stated that India would continue to remain a low-
income country for decades to come but could be a "motor for the world
economy" if it fulfills its growth potential. Goldman Sachs has outlined 10
things that it needs to do in order to achieve its potential and grow 40 times by
2050. These are
1. improve governance
2. raise educational achievement
3. increase quality and quantity of universities
4. control inflation
5. introduce a credible fiscal policy
6. liberalize financial markets
7. increase trade with neighbours
8. increase agricultural productivity
9. improve infrastructure and


ECONOMY OF THE UNITED STATES:
The economy of the United States is the worlds largest nominal economy. Its
nominal gross domestic product (GDP) was estimated at $14.2 trillion in 2009,
which is about three times that of the world's second largest national economy,
Japan. Its GDP by PPP is almost twice that of the second largest, China. The
U.S. economy maintains a very high level of output per person (GDP per capita,
$46,442 in 2009, ranked at around number ten in the world). Historically, the
U.S. economy has maintained a stable overall GDP growth rate, a low
unemployment rate, and high levels of research and capital investment funded
by both national and, because of decreasing saving rates, increasingly by
foreign investors. In 2006, consumer spending made up 70 percent of the United
States Gross Domestic Product.
Since 1976, the US has sustained trade deficits with other nations, and since
1982, current account deficits; the nation's long-standing surplus in its trade in
services was maintained, however, and reached US$140 billion yearly in 2008
and 2009. In recent years, the primary economic concerns have centered on:
high household debt ($11 trillion, including $2.5 trillion in revolving debt), high
net national debt ($9 trillion), high corporate debt ($9 trillion), high mortgage
debt (over $15 trillion as of 2005 year-end), high unfunded Medicare liability
($30 trillion), high unfunded Social Security liability ($12 trillion), high
external debt (amount owed to foreign lenders), high trade deficits, a serious
deterioration in the United States net international investment position (NIIP) (-
24% of GDP), and high unemployment. In 2006, the U.S economy had its
lowest saving rate since 1933. These issues have raised concerns among
economists and national politicians.
The United States economy experienced a crisis in 2008 led by a derivatives
market and subprime mortgage crisis, and a declining dollar value. On
December 1, 2008, the NBER declared that the United States entered a
recession in December 2007, citing employment and production figures as well
as the third quarter decline in GDP. The recession did, however, lead to a
reduction in record trade deficits, which fell from $840 billion annually during
the 2006-08 period, to $500 billion in 2009, as well as to higher personal
savings rates, which jumped from a historic low of 1% in early 2008, to nearly
2% in late 2009.


Education
There are 4,352 colleges, universities, and junior colleges in the United States.
In 2007, Americans stood second only to Canada in the percentage of 35 to 64
year olds holding at least two-year degrees. Among 25 to 34 year olds, the
country stands tenth. The nation stands 15 out of 29 rated nations for college
completion rates, slightly above Mexico and Turkey. According to government
data, one-tenth of students are enrolled in private schools. Approximately 85%
of students enter the public schools.
Immigration
As of 2009, the United States received 4.31 immigrants per 1000 people,
ranking 25th globally.
Energy:
The United States is the largest energy consumer in terms of total use, using 100
quadrillion BTUs 2005. The U.S. ranks seventh in energy consumption per-
capita after Canada and a number of small countries. The majority of this
energy is derived from fossil fuels: in 2005, it was estimated that 40% of the
nation's energy came from petroleum, 23% from coal, and 23% from natural
gas. Nuclear power supplied 8.4% and renewable energy supplied 6.8%, which
was mainly from hydroelectric dams although other renewables are included.
Agriculture:
Agriculture is a major industry in the United States and the country is a net
exporter of food. The United States controls almost half of world grain exports.
Products include wheat, corn, other grains, fruits, vegetables, cotton; beef, pork,
poultry, dairy products; forest products; fish.
Manufacturing:
The United States is the world's largest manufacturer, with a 2007 industrial
output of US$2.69 trillion.
Main industries include petroleum, steel, motor vehicles, aerospace,
telecommunications, chemicals, electronics, food processing, consumer goods,
lumber, and mining. A total of 3.2 million one in six U.S. factory jobs have
disappeared since the start of 2000.

Finance:
The New York Stock Exchange is the largest stock exchange in the world by
value of its listed companies' securities. As of October 2008, the combined
capitalization of all domestic NYSE listed companies was US$10.1 trillion.
NASDAQ, is another American stock exchange. It is the largest electronic
screen-based equity securities trading market in the United States. With
approximately 3,800 companies and corporations, it has more trading volume
per hour than any other stock exchange in the world.
International trade:
The United States is the world's largest trading nation. Since it is the world's
leading importer, there are many U.S. dollars in circulation all around the
planet. The dollar is also used as the standard unit of currency in international
markets for commodities such as gold and petroleum (the latter sometimes
called petrocurrency is the source of the term petrodollar). Large foreign
economies such as China, Japan, Arab states of the Persian Gulf, and the EU
own huge dollar reserves (especially as the US is more in debt) so there is a fear
that they will move away from the dollar. China's reserves are more than $2
trillion, the world's largest. China owns an estimated $1.6 trillion of U.S.
securities. In 2008, the total U.S. trade deficit was $695.9 billion, which is $1.8
trillion in exports minus $2.5 trillion in imports.
Economic predictions and forecasting:
Predictions about the direction of the United States economy in the short term
and long term are crucial factors in determining federal government policies,
business decisions, and Federal Reserve decisions. Several institutions make
economic predictions, including: Global Insight, and the UCLA Anderson
Forecast. Various state agencies, including the California Department of
Finance, also make predictions.
Currency and central bank:
The United States dollar is the unit of currency of the United States. The U.S.
dollar is the currency most used in international transactions. Several countries
use it as their official currency, and in many others it is the de facto currency.

ECONOMY OF THE UNITED KINGDOM:
The United Kingdom is a major developed capitalist economy. It is currently
the world's sixth largest by nominal GDP and the sixth largest by purchasing
power parity. It is the third largest economy in Europe after Germany's and
France's in nominal terms, and the second largest after Germany's in terms of
purchasing power parity. Its GDP PPP per capita is the 18th highest in the
world. The United Kingdom is also a member of the G7, G8, G-20 major
economies, the Commonwealth of Nations, the Organisation for Economic Co-
operation and Development, the World Trade Organisation, and the European
Union.
The United Kingdom is one of the world's most globalised countries. The
capital, London (see Economy of London), is a major financial centre for
international business and commerce,
[7]
the largest such in the world according
the Global Financial Centres Index. The British economy is made up (in
descending order of size) of the economies of England, Scotland, Wales and
Northern Ireland. In 1973, the UK acceded to the European Economic
Community which is now known as the European Union after the ratification of
the Treaty of Maastricht in 1993. The UK entered its worst recession since
World War 2 in 2009 but climbed its way back into growth by Q4 of 2009. The
recovery from the recession is expected to be slow. The UK government
expects annual growth in 2010 to be between 1% and 1.5%; latest figures show
that GDP growth is expected to soar past predictions for 2010 with growth of
3.1%. The government also predict that the UK economy will grow by between
3% and 3.5% in 2011, far stronger growth than its EU counterparts. The UK is
still predicted to become the largest economy in the European Union by 2020,
over taking both Germany and France due to forecasted strong growth in the
massive UK financial services sectors.
]
Also a strong rebound is expected in the
UK Manufacturing sector as the British Pound has fallen against the Euro and
Dollar meaning British goods are cheaper abroad, this will take business off EU
neighbours where goods have become more expensive due to a rise in the euro;
latest figures show that UK Manufacturing grew at its fastest pace for 15 years
in Q1 of 2010. The OECD has also stated that the UK economy is growing
faster than all other G7 members apart from Canada.

This boom ended in 2008 when the United Kingdom suddenly entered a
recession brought about by the global financial crisis. Beginning with the
collapse of Northern Rock, which was taken into public ownership in February
2008, other banks had to be partly nationalised. The Royal Bank of Scotland
Group, which at its peak was the second largest bank in the UK and the fifth
largest in the world by market capitalisation, was effectively nationalised on 13
October 2008, when the British Government announced it would take a stake of
up to 58% in the Group. By mid 2009, the HM Treasury had a 70.33%
controlling shareholding in RBS, and a 43% shareholding through UK Financial
Investments Limited of Lloyds Banking Group, formerly the fifth largest
banking group in the UK. This recession has seen unemployment rise
substantially, from just over 1,600,000 in January 2008 to nearly 2,500,000 in
October 2009 yet less so when comapared to countries such as Germany,
France or Spain.

The UK economy had been one of the strongest EU economies in terms of
inflation, interest rates and unemployment, all of which remained relatively low
until the 2008-09 recession. Unemployment has since reached a peak of just
under 2.5 million (7.8%), the highest level since early 1990s although this rate
remains far lower than many other European nations. However, interest rates
have been slashed to 0.5%. In 2007, according to the International Monetary
Fund, the United Kingdom had the ninth highest level of GDP per capita in the
European Union in terms of purchasing power parity, after Luxembourg,
Ireland, the Netherlands, Austria, Denmark, Sweden, Belgium and Finland.
However, in common with the economies of other English-speaking countries,
it has higher levels of income inequality than many European countries. During
August 2008 the IMF warned that the UK economic outlook had worsened due
to a twin shock: financial turmoil as well as rising commodity prices. Both
developments harm the UK more than most developed countries, as the UK
obtains revenue from exporting financial services while recording deficits in
finished goods and commodities, including food.

Recent economic performance
The UK entered a recession in Q2 of 2008, according to the UK Office of
National Statistics (ONS) and exited it in Q4 of 2009. The revised ONS figures
of November 2009 showed that the UK had suffered six consecutive quarters of
negative growth. As of the end of November 2009, the economy had shrunk by
4.9%, making the 2008-2009 recession the longest since records began. In
December 2009, the Office of National Statistics revised figures for the third
quarter of 2009 showed that the economy shrank by 0.2%, compared to a 0.6%
fall the previous quarter. In the 3 months to February 2010 the U.K. economy
grew yet again by 0.4%.
It has been suggested that the UK initially lagged behind its European neighbors
because the UK entered the 2008 recession later. However, German GDP fell
4.7% year on year compared to the UK's 5.1%, and Germany has now posted a
second quarterly gain in GDP. Commentators suggest that the UK suffered a
slightly longer recession than other large European countries, as a result of
government policy dating back to the policies of the Thatcher government of
1979, in which UK governments have moved away from supporting
manufacturing and focused on the financial sector. The OECD predicts that the
UK will grow 1.6% in 2010. The unemployment rate recorded by the Labor
Force Survey fell in the fourth quarter of 2009, the first of the big 3 economies
in the EU to do so.
Gross Domestic Product (GDP) decreased by a (second revision) figure of 0.2
per cent in the third quarter of 2009, after a decrease of 0.6 per cent in the
second quarter, according to the Office for National Statistics (ONS). There was
a 2.4% decline in the first quarter of 2009. The economy has now contracted
5.9% from its peak before the recession began, the BBC reports.
In May 2009 the European Commission (EC) stated: "The UK economy is now
clearly experiencing one of its worst recessions in recent history." The EC
expected GDP to decline 3.8pc in 2009 and projected that growth will remain
negative for the first three quarters of 2009. It predicted two quarters of "virtual
stagnation" in late 2009-early 2010, followed by a gradual return to "slight
positive growth by late 2010"
Industries:
Agriculture, hunting, forestry, and fishing:
Agriculture is intensive, highly mechanised, and efficient by European
standards, producing about 60% of food needs with less than 2% of the labour
force (477,000 out of a total workforce of 31,598,000, 3rd quarter of 2007) It
contributes around 2% of GDP. Around two-thirds of the production is devoted
to livestock, one-third to arable crops.The main crops that are grown are wheat,
barley, oats, oilseed rape, maize for animal feeds, potatoes and sugar beet. New
crops are also emerging, such as linseed for oil and hemp for fibre
production.Agriculture is subsidised by the European Union's Common
Agricultural Policy.
Production:
Mining and quarrying:
The Blue Book 2006 reports that this sector added gross value of 21,876
million to the UK economy in 2004.
Manufacturing:
In 2003, manufacturing industry accounted for 16% of national output in the
UK and for 13% of employment. This is a continuation of the steady decline in
the importance of this sector to the British economy since the 1960s, although
the sector is still important for overseas trade, accounting for 83% of exports in
2003. Manufacturing is an important sector of the modern British economy and
there is a considerable amount of published research on the subject of the
factors affecting its growth and performance
Electricity, gas and water supply:
The Blue Book 2006 reports that this sector added gross value of 17,103
million to the UK economy in 2004. The United Kingdom is expected to launch
the building of new nuclear reactors to replace existing generators and to boost
UK's energy reserves.
Construction:
The Blue Book 2006 reports that this industry added gross value of 64,747
million to the UK economy in 2004.

Financial intermediation:
London is the world's largest financial centre, with financial services based on
two districts: 'The City' (the City of London) and the Docklands (particularly
around Canary Wharf). The City houses the London Stock Exchange (shares
and bonds), London Metal Exchange (base metal and plastic futures), Lloyds of
London (insurance), and the Bank of England. The Docklands began
development in the 1980s and is now home to the Financial Services Authority,
as well as several important financial institutions (such as Barclays Bank,
Citigroup and HSBC). There are now over 500 banks with offices in the City
and Docklands, with the majority of business in London being conducted on an
international basis, with established leads in areas such as Eurobonds, foreign
exchange markets, energy futures and global insurance. The Alternative
Investments Market has acted a growth market over the past decade, allowing
London to also expand as an international equity centre for smaller firms.
Public administration and defense:
The Blue Book 2006 reports that this sector added gross value of 55,280
million to the UK economy in 2004.
Education:
The Blue Book 2006 reports that this sector added gross value of 61,786
million to the UK economy in 2004.
Health and social work:
The Blue Book 2006 reports that this sector added gross value of 75,817
million to the UK economy in 2004.
Currency:
London is the world capital for foreign exchange trading. The highest daily
volume, counted in trillions of dollars US, is reached when New York enters the
trade. Until relatively recently there was debate over whether or not the UK
should abolish its currency Pound Sterling and join the Euro. The British Prime
Minister, Gordon Brown, pledged at the time to hold a public referendum based
on certain tests he set as Chancellor of the Exchequer


ECONOMY OF EUROPEAN UNION:
The European Union (EU) is an economic and political union of 27 member
countries, located primarily in Europe. Committed to regional integration, the
EU was established by the Treaty of Maastricht on 1 November 1993 upon the
foundations of the European Communities. With over 500 million citizens, the
EU combined generates an estimated 28% share (US$ 16.45 trillion in 2009) of
the nominal gross world product and about 21.3% (US$14.8 trillion in 2009) of
the PPP gross world product.
The EU has developed a single market through a standardized system of laws
which apply in all member states, ensuring the free movement of people, goods,
services, and capital. It maintains common policies on trade, agriculture,
fisheries and regional development. Sixteen member states have adopted a
common currency, the euro, constituting the Euro zone. The EU has developed
a limited role in foreign policy, having representation at the World Trade
Organization, G8, G-20 major economies and at the United Nations. It enacts
legislation in justice and home affairs, including the abolition of passport
controls by the Schengen Agreement between 22 EU and 3 non-EU states.
As an international organization, the EU operates through a hybrid system of
supranationalism and intergovernmentalism. In certain areas, decisions are
made through negotiation between member states, while in others; independent
supranational institutions are responsible without a requirement for unanimity
between member states. Important institutions of the EU include the European
Commission, the Council of the European Union, the European Council, the
Court of Justice of the European Union, and the European Central Bank. The
European Parliament is elected every five years by member states' citizens, to
whom the citizenship of the European Union is guaranteed.
The EU traces its origins from the European Coal and Steel Community formed
among six countries in 1951 and the Treaty of Rome formed in 1957 by the
same states. Since then, the EU has grown in size through enlargement, and in
power through the addition of policy areas to its remit.
Monetary union:
16 EU countries have introduced the euro as their sole currency.
The creation of a European single currency became an official objective of the
EU in 1969. However, it was only with the advent of the Maastricht Treaty in
1993 that member states were legally bound to start the monetary union no later
than 1 January 1999. On this date the euro was duly launched by eleven of the
then fifteen member states of the EU. It remained an accounting currency until 1
January 2002, when euro notes and coins were issued and national currencies
began to phase out in the euro zone, which by then consisted of twelve member
states. The euro zone has since grown to sixteen countries, the most recent
being Slovakia which joined on 1 January 2009.
The euro is designed to help build a single market by, for example: easing travel
of citizens and goods, eliminating exchange rate problems, providing price
transparency, creating a single financial market, price stability and low interest
rates, and providing a currency used internationally and protected against
shocks by the large amount of internal trade within the euro zone. It is also
intended as a political symbol of integration and stimulus for more. Since its
launch the euro has become the second reserve currency in the world with a
quarter of foreign exchanges reserves being in euro.
The euro, and the monetary policies of those who have adopted it in agreement
with the EU, is under the control of the European Central Bank (ECB). There
are eleven other currencies used in the EU with all but two legally obliged to be
switched to the euro. A number of other countries outside the EU, such as
Montenegro, use the euro without formal agreement with the ECB.
Budget:
The twenty-seven member state EU had an agreed budget of 120.7 billion for
the year 2007 and 864.3 billion for the period 20072013, representing 1.10%
and 1.05% of the EU-27's GNI forecast for the respective periods. By
comparison, the United Kingdom's expenditure for 2004 was estimated to be
759 billion, and France was estimated to have spent 801 billion. In 1960, the
budget of the then European Economic Community was 0.03% of GDP.
Agriculture:
The Common Agricultural Policy (CAP) is one of the oldest policies of the
European Community, and was one of its core aims. The policy has the
objectives of increasing agricultural production, providing certainty in food
supplies, ensuring a high quality of life for farmers, stabilizing markets, and
ensuring reasonable prices for consumers. It was, until recently, operated by a
system of subsidies and market intervention. Until the 1990s, the policy
accounted for over 60% of the then European Community's annual budget, and
still accounts for around 35%.
Energy:
In 2006, the 27 member states of the EU had a gross inland energy consumption
of 1,825 million tonnes of oil equivalent (toe). Around 46% of the energy
consumed was produced within the member states while 54% was imported. In
these statistics, nuclear energy is treated as primary energy produced in the EU,
regardless of the source of the uranium, of which less than 3% is produced in
the EU.
Infrastructure:
The EU is working to improve cross-border infrastructure within the EU, for
example through the Trans-European Networks (TEN). Projects under TEN
include the Channel Tunnel, LGV Est, the Frjus Rail Tunnel, the resund
Bridge and the Brenner Base Tunnel. In 2001 it was estimated that by 2010 the
network would cover: 75,200 kilometers (46,700 mi) of roads;
78,000 kilometers (48,000 mi) of railways; 330 airports; 270 maritime harbors;
and 210 internal harbors.
Education and research
Education and science are areas where the EU's role is limited to supporting
national governments. In education, the policy was mainly developed in the
1980s in programmed supporting exchanges and mobility. The most visible of
these has been the ERASMUS programmed, a university exchange programmed
which began in 1987. In its first 20 years it has supported international
exchange opportunities for well over 1.5 million university and college students
and has become a symbol of European student life.

ECONOMY OF JAPAN:
The economy of Japan is the second largest in the world, after the United
States at $5.07 trillion in terms of nominal GDP and third after the United States
and China when adjusted for purchasing power parity. The workers of Japan
rank 18th in the world in GDP per hour worked as of 2006. The Big Mac Index
shows that the wages in Tokyo are the highest among principal cities in the
world.
Japan used another technique, somewhat based on Krugman's, called
Quantitative easing. As opposed to flooding the money supply with newly
printed money, the Bank of Japan expanded the money supply internally to raise
expectations of inflation. Initially, the policy failed to induce any growth, but it
eventually began to affect inflationary expectations. By late 2005, the economy
finally began what seems to be a sustained recovery. GDP growth for that year
was 2.8%, with an annualized fourth quarter expansion of 5.5%, surpassing the
growth rates of the US and European Union during the same period. Unlike
previous recovery trends, domestic consumption has been the dominant factor
of growth.
Despite having interest rates down near zero for a long period of time, the
Quantitative easing strategy did not succeed in stopping price deflation. This led
some economists, such as Paul Krugman, and some Japanese politicians, to
speak of deliberately causing hyperinflation. In July 2006, the zero-rate policy
was ended. In 2008, the Japanese Central Bank still has the lowest interest rates
in the developed world, deflation has still not been eliminated and the Nikkei
225 has fallen over approximately 50% (between June 2007 and December
2008).In recent years, Japan has been the top export market for almost 15
trading nations worldwide.
Infrastructure:
As of 2005, one half of energy in Japan is produced from petroleum, a fifth
from coal, and 14% from natural gas. Nuclear power in Japan makes a quarter
of electricity production and Japan would like to double it in the next decades.
Japan's road spending has been large. The 1.2 million kilometers of paved road
are the main means of transportation. Japan has left-hand traffic. A single
network of speed, divided, limited-access toll roads connects major cities and
are operated by toll-collecting enterprises. New and used cars are inexpensive.
Car ownership fees and fuel levies are used to promote energy-efficiency.

Services:
Japan Airlines, though faced with massive debts as of 2010, is considered one
of the largest airlines in the world.
Japan's service sector accounts for about three-quarters of its total economic
output. Banking, insurance, real estate, retailing, transportation, and
telecommunications are all major industries such as Mitsubishi UFJ, Mizuho,
NTT, TEPCO, Nomura, Mitsubishi Estate, Tokio Marine, JR East, Seven & I,
and Japan Airlines counting as one of the largest companies in the world. The
Koizumi government set Japan Post, one of the country's largest providers of
savings and insurance services for privatization by 2014. The six major
keiretsus are the Mitsubishi, Sumitomo, Fuyo, Mitsui, Dai-Ichi Kangyo and
Sanwa Groups. Japan is home to 326 companies from the Forbes Global 2000
or 16.3% (as of 2006).

Industry:
Lexus LS. The rapid growth and success of Toyota's Lexus and other Japanese
automakers reflects Japan's strength and global dominance in the automobile
industry. Japanese manufacturing is very diversified, with a variety of advanced
industries that are highly successful.
The fields in which Japan enjoys high technological development include
consumer electronics, automobile manufacturing, semiconductor
manufacturing, optical fibers, optoelectronics, optical media, facsimile and copy
machines, and fermentation processes in food and biochemistry.
Agriculture

Rice is a very important crop in Japan as shown here in a rice paddy in Autumn,
Kurihara, Miyagi prefecture.Only 12% of Japan's land is suitable for cultivation.
Due to this lack of arable land, a system of terraces is used to farm in small
areas. This results in one of the world's highest levels of crop yields per unit
area, with an overall agricultural self-sufficiency rate of about 50% on fewer
than 56,000 km (14 million acres) cultivated.

Current economic issues:
The Japanese monetary authorities' continued desire to depress the price of yen
relative to other key specific currencies to protect domestic business from
imports may no longer be feasible. The most recent record intervention in 2003
amounted to over 17 trillion yen, more than one third of one trillion US dollars
at the time and nearly 3% of Japan's 2003 GDP, being sold in favor of other
non-yen denominated assets. However, since 2005, Japan has not directly
intervened to buy currency, as yen carry trade has effectively carried out the
same task.
Interestingly, international trade has expanded by 60% from 91.4 trillion yen to
142.6 trillion yen from 2001 to 2006. Taking in account the economic
participation rate, Japan's GDP per worker has increased steadily.
The Organization for Economic Cooperation and Development downgraded its
economic forecasts on March 20, 2008 for the Japan for the first half of 2008.
Japan does not have room to ease fiscal or monetary policy, the 30-nation group
warned. For Japan, the OECD said the pace of underlying growth appears to be
softening despite support from buoyant neighboring Asian economies. The
organization expects first-quarter GDP to be up 0.3 percent and predicts a rise
of 0.2 in the second quarter.
On November 17, 2008, Japanese government officials announced that the
economy was in a recession. It was reported that Japan's economy contracted at
an annual pace of 1.8% in the third quarter of 2008. It is forecasted to have
shrunk 0.8% through the fiscal year that ends March 2009. In July 2009
unemployment reached a post-war high of 5.7 per cent, according to the Japan
Times. Although the economy is recovering in 2010 levels of public debt
remain extremely high, approaching 200% of GDP.
On 17 March 2010 the Bank of Japan moved to boost yen reserves for 3-month
bank loans to 20 trillion yen, although economists such as Richard Koo of the
Nomura Research Institute see this as a move merely to please the Democratic
Party of Japan because, as no money is leaving the financial system, there will
be no impact on long term rates in either the ordinary market or the Foreign
exchange market. As a result of this the foreign press and the International
Monetary Fund believe Japan should be doing more to help its economy
recover.

The Law of One Price:

The Law of One Price states that in an efficient market where there is free flow
of goods, services and capital a commodity has only one price regardless of the
country in which it is purchased. The idea behind the Law of One Price is that if
a commodity costs more in one country than the other, arbitrage will be possible
by moving the commodity from the country with lower price to the one with the
higher price.



Purchasing Power Parity:

The Purchasing Power Parity is based on the Law of One Price. It states that
exchange rate will adjust so that a commodity will cost the same regardless of
the country in which it is purchased in.
Relative Purchasing Power Parity:
Relative Purchasing Power Parity further evolved from the concept of
Purchasing Power Parity. Basically it relates the concept of Purchasing Power
Parity with the concept of inflation. It states that the inflation in one country
over the inflation of the other country determines the exchange rate between
these two countries.

Based on the Relative Purchasing Power Parity, the expected exchange rate in
the future is calculated as follows:

Expected exchange rate in the future = Current Spot Exchange Rate * ((1 +
(Inflation of Foreign County - Inflation of Home Country)) ^ Number of
Periods)
Interest Rate Parity:

The Interest Rate Parity states that the interest rate difference between two
countries is equal to the percentage difference between the forward exchange
rate and the spot exchange rate. The formula for the Interest Rate Parity is
shown below.

Forward exchange rate for settlement at period N = Current Spot Exchange Rate
* ((1+Foreign country nominal risk free interest rate)/(1+US nominal risk free
interest rate)).


















Research Design & Methodology:

Title of the study:
A study on rupees v/s four major currencies US Dollar, British Pound, Euro,
Japanese Yen fluctuation and its impact on Indian indices.

Statement of Problem:
This study is required many Indian exports suffering from fluctuation in
exchange rates. The study aims the analysis of the factor that causes fluctuation
in exchange rate. By this exporters can minimize the risk and predict the future
exchange rate.

Objective of the study:

To analyze the fluctuation of Indian rupee against four major currencies
US Dollar, British Pound, Euro, Japanese Yen.
To analyze the effect of fluctuations on the Indian Stock Market.
To analyze the effect of fluctuations on FIIs with respect to Indian
Indices.
To analyze the strengthening and weakening of Indian rupee against the
US dollars.

Scope of the study:
The analysis is restricted to currency of India, USA, UK, European-
Union and Japan.




LIMITATIONS OF THE STUDY:
Other currencies were not analysed because the shortage of time.
In depth study was not possible due to the non-availability of certain
information.


Data Collection:
SECONDARY DATA:
Secondary data was collected from sources such as journal, magazine, articles,
newspaper and website.