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Unit 9: Indian Currency System

to mark and obtain trade-related expenditures receive dollars (or any other foreign currency) Notes
for export of goods and services and pay dollars for import of goods and services, make various
remittance, access foreign currency for travel, studies abroad, medical treatment and gifts, etc.

Did u know? Apart from the CRR, banks are required to maintain liquid assets in the form
of gold, cash and approved securities.

Self Assessment

Fill in the blanks:

6. …………………… are termed as Reserve Assets in the Balance of Payments and are placed
in under the financial account.
7. It is essential to keep in mind that …………………… lets free flow for all-purpose other
than for capital purpose such as investment and loans.
8. Capital account convertibility is measured to be one of the main types of a …………………….
9. Foreign Exchange reserves are termed as …………………… in the Balance of Payments
and are placed in under the financial account.
10. The …………………… is the only lawful tender recognised in the India and is also
recognised as legal tender in neighbouring Nepal and Bhutan, the latter’s exchange value
being attached to the rupee.

!
Caution Supportive and liberal Government policies together with careful strategies to
promote infrastructure offers great opportunities to engineering and construction (E&C)
firms in India.

Task Add few more updates on Indian economic development by doing a research
study.

Case Study The British IMF loan in 1976
[Post War Period to the 1967 Devaluation]

oon after the Bretton Woods system was introduced there were major failures in
agricultural harvests in Europe (and hence exports) as a result of adverse weather.
SMany European nations were particularly vulnerable to these fluctuations, not the
least because their external reserve position (holdings of gold and currency reserves) was
fragile in the face of Balance of Payments deficits. The Marshall aid plan began in 1948
partially helped European nations to fund their balance of payments deficits while still
engaging in the reconstruction effort. But the reserve losses were still substantial during
this period. The Bank of England, for example, started 1946 with 2,696 million dollars’
worth of gold and dollar reserves and by 1949 this had dropped to 1,668 million dollars.
Contd...

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