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Which of the following groups is most likely to benefit from an appreciation of the Rupee?
- Importers in India
- Exporters in India
- Borrowers through ECBs
- Exporters to India
Select the correct answer using the code given below:
- a)1 and 3 only
- b)2 and 4 only
- c)1 only
- d)1, 3 and 4 only
Correct answer is option 'D'. Can you explain this answer?
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Most Upvoted Answer
Which of the following groups is most likely to benefit from an apprec...
Currency appreciation is an increase in the value of one currency in relation to another currency. Currencies appreciate against each other for a variety of reasons, including the government policy, interest rates, trade balances and business cycles. A Rupee appreciation takes place when its value increases in relation to other currencies, say US Dollar. For instance, there would be an appreciation in the Rupee if the dollar/rupee exchange rate moves from ₹70/$ to ₹65/$. Importers in India would be benefitted as they would have to pay less in Rupee terms for the same amount of (say dollar) imports in case of Rupee appreciation.
So, statement 1 is correct. Exporters in India would stand to lose as they would receive less in Rupee terms for the same amount of (say dollar) exports in case of Rupee appreciation.
So, statement 2 is not correct. In the case of Rupee appreciation, entities in India borrowing under the ECB route would have their borrowing costs reduced as they would have to pay less in Rupee terms. They would benefit from the Rupee appreciation. So, statement 3 is correct. Exporters to India would gain in case of the Rupee appreciation.
For instance, a person exporting Rs. 10,000 worth of goods to India from, say, the US would receive more in terms of the US dollar if the Rupee appreciates from Rs. 70/$ to Rs. 65/$. So, statement 4 is correct. Therefore, the correct answer is (d).
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Which of the following groups is most likely to benefit from an apprec...
Explanation:
An appreciation of the rupee means that the value of the currency has increased relative to other currencies. This can have different effects on different groups of people. Let's look at each group mentioned in the question and see how they are affected by an appreciation of the rupee:
1. Importers in India: An appreciation of the rupee makes imports cheaper as they can buy more foreign currency with every rupee. So, importers in India will benefit from an appreciation of the rupee.
2. Exporters in India: An appreciation of the rupee makes exports more expensive as foreign buyers will have to pay more in their currency to buy Indian goods. This makes Indian goods less competitive in the global market, so exporters in India may not benefit from an appreciation of the rupee.
3. Borrowers through ECBs: External Commercial Borrowings (ECBs) are loans taken by Indian companies in foreign currency. An appreciation of the rupee reduces the amount of rupees that need to be repaid for a given amount of foreign currency borrowed. This benefits borrowers through ECBs.
4. Exporters to India: An appreciation of the rupee makes imports from other countries cheaper for India, which means that foreign exporters may benefit as Indian buyers will be able to buy more with the same amount of foreign currency.
So, based on the above analysis, we can see that importers in India, borrowers through ECBs, and exporters to India are the groups that are most likely to benefit from an appreciation of the rupee. Therefore, the correct answer is option D, which includes all of these groups.
An appreciation of the rupee means that the value of the currency has increased relative to other currencies. This can have different effects on different groups of people. Let's look at each group mentioned in the question and see how they are affected by an appreciation of the rupee:
1. Importers in India: An appreciation of the rupee makes imports cheaper as they can buy more foreign currency with every rupee. So, importers in India will benefit from an appreciation of the rupee.
2. Exporters in India: An appreciation of the rupee makes exports more expensive as foreign buyers will have to pay more in their currency to buy Indian goods. This makes Indian goods less competitive in the global market, so exporters in India may not benefit from an appreciation of the rupee.
3. Borrowers through ECBs: External Commercial Borrowings (ECBs) are loans taken by Indian companies in foreign currency. An appreciation of the rupee reduces the amount of rupees that need to be repaid for a given amount of foreign currency borrowed. This benefits borrowers through ECBs.
4. Exporters to India: An appreciation of the rupee makes imports from other countries cheaper for India, which means that foreign exporters may benefit as Indian buyers will be able to buy more with the same amount of foreign currency.
So, based on the above analysis, we can see that importers in India, borrowers through ECBs, and exporters to India are the groups that are most likely to benefit from an appreciation of the rupee. Therefore, the correct answer is option D, which includes all of these groups.
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Which of the following groups is most likely to benefit from an appreciation of the Rupee? Importers in India Exporters in India Borrowers through ECBs Exporters to IndiaSelect the correct answer using the code given below:a)1 and 3 onlyb)2 and 4 onlyc)1 onlyd)1, 3 and 4 onlyCorrect answer is option 'D'. Can you explain this answer?
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