Economic Terminologies II

11. Foreign Currency Exchangeable Bonds (FCFB)

Under this, bonds can be converted into equity of a group company. As a result, payment of
interest on FCEBs would be subject to payment of withholding tax. Funds raised through
FCEB cannot be invested in the capital market, but can be used for overseas expansion.

12. Foreign Currency Convertible Bonds (FCCBS)

FCCBS are bonds which can be redeemed only for shares of the issuing companies- not
companies in which the issuer has a stake.

13. ‘Treaty Shopping” and “Round Tripping”

In Treaty Shopping investors from third countries route their investments through Mauritius
into India to avail of capital gains exemption. In Round Tripping, domestic funds/companies
go out and come back again through circuitous routes from Mauritius, to save tax. India has
long been suspecting that, Treaty Shopping and Round Tripping are being resorted to
through Double Taxation Avoidance Agreement (DTAA) with Mauritius.

14. Zeroing
If refers to the practice of looking only at imports priced at a lower level than in their home
markets and ignoring (or zeroing) similar products that actually cost more at home, when
making comparison to establish the level of dumping.

15. Difference between Outsourcing and Worldsourcing.

Outsourcing is a centralized top-down strategy designed to save money on non-core
operations by handing those operations to a third party evaluated by a single criterions: the
lowest price, whereas, world sourcing is a global, decentralized strategy designed top drive
greater value and quality by distributing or organization’s core functions across multiple
global hubs of excellence located wherever the best resources talent, ideas and efficiencies
exist or can be created.

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16. De-Coupling
The belief that, India and other emerging markets can go their own way regardless of what
happens in the advanced world is known as Decoupling.

17. Euro-Control
It is the European Union regulation in the demand and supply of Euro in international market.

18. Brown field Investment

The process of entering into foreign market by acquiring existing firm in that market is called
Brown field investment.

19. Comprehensive Economic Cooperation Agreement (CECA)

It is an all encompassing FTA, (Free Trade Agreement) covering trade in goods, services
and investment.

20. Carbon Credit

Carbon credits are certificates issued to countries that reduce their emission of Green House
Gases (GHGs) which leads to global warming.

21. Customs Union

When two or more nations remove all trade Barriers in course of the trade among
themselves and when they also resolves to place common external tariff on all order nations
it is known as custom union.

22. Carbon Trading

Carbon trading or emissions trading is an administrative approach used to control pollution
by providing economic incentives for achieving reduction in the emissions of pollutants.

23. Certified Emissions Reduction Credits

These are climate credit (or carbon credits) issued by the clean development mechanism
executive board for emission reductions achieved by Clean Development Mechanism
projects and verified under the Kyoto Protocol rules.

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24. Green GDP
It is a guideline by the “Report to US” to renew development of a “Green GDP” indicator,
which would track economic output and take environmental issues into account.

25. Green GNP

Used in measuring National Income when environment depreciation is deducted from GNP,
we get Green GNP.

26. Purchasing Power Parity

A theory of international exchange which holds that price of similar goods in different
countries are same.

27. Eurobonds
The bonds that can be issued in one country but can also be traced in other countries in
Euro currency are called Eurobonds.

28. Foreign Institutional Investor (FLL)

Fll is an entity established to make investments in India. These Flls need to get registered
with the Securities and Exchange Board of India.

29. Dutch Disease

With increased capital inflows and appreciating rupee, concerns about possible
overvaluation of the currency and consequently loss of long term competitiveness of exports
in traditional and goods sector is popularly known as Dutch Disease.

30. Super 301

A clause of US Trade and Competition Act, 1988 under it USA may adopt any retaliation
measure against any country creating obstacles for US trade so as to give losses to its firms.

31. Special 301

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 A Clause of US trade and Competition Act 1988 under it US may adopt any retaliatory
measure to protect the intellectual property rights holders of USA.

32. Mode 1 and Mode 4 Interactions

Under WTO, mode-4 interaction is on the cross-border supply of professional services,
computer related services, other business services, health and education, tourism and
financial data transfer whereas mode-1 interaction is on off shore services like BPO.

33. Devaluation of a Currency

Conscious decision taken by the Central Bank of a country to lower the external value of
domestic currency in international markets is devaluation. It is done to push up exports.

34. Depreciation of Currency

Depreciation is the change in exchange rate of a currency due to market forces of demand
and supply. When the demand for Dollar would be more than supply, Rupee will depreciate.
35. Balance of Payment (BOP)
BOP of a nation is the systematic record of all transactions that a nation carries out with rest
of the world. It tells us what a country receives or pays to the outside world.

36. Non Tariff Barriers

All restrictions on import by Government in a form other than taxes. They mainly include
restriction on quantity and quality of goods.

37. Line of Credit (LOC)

Line of credit is one of the financing mechanisms through which EXIM Bank of India extends
finance to support export of goods and services under deferred payment terms.

38. Name the Two agencies that help to promote FDI in India?
1) Foreign Investment Promotion Board and
2) Foreign Investment Implementation Authority

39. Foreign Direct Investment (FDI)

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 It is a long term foreign investment made in setting up of revenue generating project is a
country.

40. What is the difference between Balance of Trade (BOT) and Balance of Payment (BOP)?
BOT is the annual statement of a country’s trade in goods (visible) while the BOP is a
statement of its trade in goods, services and all other financial transactions with rest of the
world.

41. Anti Dumping Duty

It is a duty which is imposed on imported commodities so that the benefits of domestic
subsidy on these commodities is nullified.

42. Automatic Route of FDI

This route allows foreign investment in India without prior approval of RBI. The investor is
only required to inform the RBI within 30 days of the investment.

43. Special Drawing Rights

It is a reserve asset, known as ‘Paper Gold’ created within the framework of the International
Monetary Fund, in an attempt to increase international liquidity. It forms a part of country’s
official reserves.

44. How fuels are priced?

Fuels are priced on the basis of assessable value delivery charge from depot to retail
outlets, excise duty sales tax, education cess and dealer’s commission.

45. Patent
A patent is an exclusive right for a limited period of time granted by the government to the
patentee in lieu of full disclosure of the invention. A patent lasts for 20 years from the date of
filling the application.

46. Special Products

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 The Hong Kong declaration of the WTO provides that the developing countries would have
the flexibility to designate an appropriate number of tariff lines as ‘special products’ guided
by indicators based on the criteria of food security, livelihood security and rural development.

47. Special Safeguard Mechanism

Proposed at the Hong Kong Ministerial Conference of the WTO, as a mechanism to protect
the farmers of developing countries from the uncertainties of agricultural markets. The
declaration provides that, this mechanism would apply both in the event of sudden surges in
imports and sudden drop in international prices.

48. Special Economic Regions (SERs)

The attract large doses of investment the government is planning to develop SERs which
house more than one Special Economic Zones (SEZs). The centre and the states would
provide critical infrastructure in these regions for private sector to set up manufacturing and
services in SERs.

49. Special Economic Zones (SEZs)

The Special Economic Zones are modified versions of the earlier export processing zones.
These are specially demarcated areas, that allows units locating there to function under a
set of tax and other rules very different from those in rest of the country. The idea is to
encovrage units and entrepreneurs operating there.

50. Free Trade Agreement

A comprehensive economic arrangement wherein goods and services flow within the region
without any restriction and with minimum duties.

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