competition success review Published this article page no 128 Rationalization of External Commercial Borrowing (ECB) through steps likeo Replacing the system of sector wise limits All entities eligible to receive FDI have been permitted to raise ECBs up to USD 750 million per financial year under automatic route subject to certain terms and conditions prescribed in the Guidelines. o Relaxed the enduse restrictions related to ECBs allowing corporates and nonbanking finance companies (NBFCs) to raise ECBs for working capital and general corporate purposes. Benefits associated with CAC Facilitates economic growth by removing impediments to inflows of capital from global players including investors businesses and trade partners. Pressure on Government for better infrastructure discipline in policies etc. to ensure credibility of national economy as a stable and mature market. Improves efficiency of the financial sector through increased competition liquidity etc. Helps in offshore rupee market development as well as domestic investors get opportunity to invest in foreign assets at a reduced cost. Improved employment and business opportunities etc. Risks associated with free capital mobility Increased exchange rate volatility in case of sudden exit of capital causing volatility devaluation or inflation in Forex. Unsustainable Foreign Debts makes businesses prone to the risk of high repayments in case of foreign debt if exchange rates become unfavorable. Creates Credit and asset bubbles if foreign investors use equity markets to bet on currency appreciation distorting asset values and adding to the risk of speculative bubbles. Exposure to global macroeconomic shocks. Effects on Balance of Trade and Exports in case of substantial inflows leading to an overvalued exchange rate making Indian exports less competitive in the international markets. Lack of effectiveness in generating growth unless productive growth happens to ensure longterm growth through robust infrastructure ease of business technological advancements etc competition success review buy.
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