Unit 2: Guidelines and Regulatory Institutions
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Questions and Answers

What was the primary purpose of founding the International Chamber of Commerce (ICC) in 1919?

  • To regulate global financial markets
  • To create a universal currency for trade
  • To establish global economic sanctions against countries
  • To promote international trade and cooperation (correct)

    • How many companies does the ICC represent globally?

  • Approximately 10 million companies
  • Over 100 million companies
  • More than 45 million companies (correct)
  • Around 30 million companies

    • Which of the following international organizations does the ICC work closely with?

  • United Nations (UN) (correct)
  • International Monetary Fund (IMF)
  • World Health Organization (WHO)
  • World Wildlife Fund (WWF)

    • In which century was the ICC founded?

    <p>20th century</p> Signup and view all the answers

    What was a key motivation for the founding members of the ICC?

    <p>To help rebuild the global economy post-World War I</p> Signup and view all the answers

    What was the primary objective of establishing the Directorate General of Foreign Trade (DGFT)?

    <p>To promote and regulate foreign trade in India</p> Signup and view all the answers

    In which year was the DGFT established?

    <p>1991</p> Signup and view all the answers

    Which previous office did the DGFT replace?

    <p>Chief Controller of Imports and Exports (CCI&amp;E)</p> Signup and view all the answers

    What does the Foreign Trade Policy (FTP) primarily aim to do?

    <p>Promote and facilitate exports and imports</p> Signup and view all the answers

    Which key area is NOT a function of DGFT?

    <p>Regulating domestic market prices</p> Signup and view all the answers

    What significant economic reforms coincided with the establishment of the DGFT?

    <p>Liberalization, Privatization, and Globalization (LPG)</p> Signup and view all the answers

    What is one of the primary responsibilities of the DGFT in terms of international trade?

    <p>Issuing licenses and permits for trade</p> Signup and view all the answers

    Which of the following statements about the DGFT is accurate?

    <p>It formulates and implements the Foreign Trade Policy.</p> Signup and view all the answers

    What is one of the primary goals of FEMA in relation to the Indian rupee?

    <p>To maintain the stability of the Indian rupee</p> Signup and view all the answers

    Which entity is empowered by FEMA to control capital movements in India?

    <p>Reserve Bank of India (RBI)</p> Signup and view all the answers

    What is one of the objectives of FEMA regarding international standards?

    <p>Aligning India’s practices with global standards</p> Signup and view all the answers

    How does FEMA contribute to financial stability?

    <p>By ensuring a well-regulated foreign exchange market</p> Signup and view all the answers

    What is a significance of FEMA in cross-border transactions?

    <p>It provides a legal framework for various types of cross-border transactions</p> Signup and view all the answers

    What obligation do Indian companies have under FEMA regarding foreign liabilities and assets?

    <p>They must file an annual return by July 15th each year</p> Signup and view all the answers

    What aspect of economic changes does FEMA adapt to?

    <p>Changing global economic trends and challenges</p> Signup and view all the answers

    What is one way FEMA promotes economic growth?

    <p>By promoting international trade and investment</p> Signup and view all the answers

    What was the original name of the Export Credit Guarantee Corporation of India Limited when it was established?

    <p>Export Risks Insurance Corporation</p> Signup and view all the answers

    What is one of the primary objectives of the ECGC?

    <p>To provide insurance coverage against payment risks</p> Signup and view all the answers

    Which type of risk does the Shipments (Comprehensive Risks) Policy cover?

    <p>Both commercial and political risks</p> Signup and view all the answers

    The Multi-Buyer Exposure Policy (MBEP) is best suited for which type of exporters?

    <p>Those dealing with multiple buyers</p> Signup and view all the answers

    What is one benefit of ECGC's credit risk guarantees for banks?

    <p>It increases lending confidence towards high-risk exporters.</p> Signup and view all the answers

    Which of the following accurately describes the Shipments (Political Risks) Policy?

    <p>Covers political risks such as government actions.</p> Signup and view all the answers

    In which year was the Export Risks Insurance Corporation renamed to ECGC?

    <p>1964</p> Signup and view all the answers

    Why does ECGC encourage Indian businesses to explore new markets?

    <p>To mitigate risks associated with international trade.</p> Signup and view all the answers

    What is the primary goal of the Interest Equalization Scheme (IES)?

    <p>To offer loans at reduced interest rates to make borrowing more affordable.</p> Signup and view all the answers

    Which of the following benefits do Export Oriented Units (EOUs) and Special Economic Zones (SEZs) enjoy?

    <p>Tax holidays and duty-free imports.</p> Signup and view all the answers

    What is the purpose of the Market Access Initiative (MAI)?

    <p>To explore new markets and promote Indian products globally.</p> Signup and view all the answers

    Which type of export license must be acquired for items included in the restricted category of the export policy?

    <p>Restricted Items License.</p> Signup and view all the answers

    What type of license is required for importing items that can only be handled through designated agencies?

    <p>Canalized Items License.</p> Signup and view all the answers

    What is the main function of the Niryat Bandhu Scheme?

    <p>To mentor new exporters in international trade practices.</p> Signup and view all the answers

    Which of the following is NOT a feature of the Export Oriented Units (EOUs)?

    <p>Guaranteed profitability.</p> Signup and view all the answers

    What is required for importing items deemed restricted by the government?

    <p>Restricted Items License.</p> Signup and view all the answers

    Study Notes

    DGFT - Directorate General of Foreign Trade

    • Established in 1991 as part of India’s economic reforms, transitioning from a highly regulated trade policy to a liberalized economy.
    • Replaced the Chief Controller of Imports and Exports (CCI&E) which had been operational since 1950.
    • Main objectives include regulating and promoting foreign trade, facilitating India's integration into the global economy.

    Role and Functions of DGFT

    • Responsible for formulating and implementing the Foreign Trade Policy (FTP), which is revised periodically to adapt to market changes.
    • Issues licenses and permits for the import and export of goods and services, regulating restricted and canalized items.
    • Promotes Export Oriented Units (EOUs) and Special Economic Zones (SEZs) by providing tax benefits, duty-free imports, and simplified procedures.
    • Implements the Interest Equalization Scheme (IES) to support exporters with loans at reduced interest rates.
    • Oversees the Market Access Initiative (MAI) to promote Indian products globally through trade fairs and marketing campaigns.
    • Operates the Niryat Bandhu Scheme to mentor and provide guidance to new exporters regarding international trade.

    Export and Import Licensing by DGFT

    • Issues various licenses to ensure compliance with the FTP, including:
      • Import Licenses: Required for restricted items, canalized items, and open general license items.
      • Export Licenses: Needed for restricted export items, helping maintain economic stability.

    FEMA - Foreign Exchange Management Act

    • Empowered the Reserve Bank of India (RBI) to regulate foreign exchange movements and monitor capital flows.
    • Aims to maintain the stability of the Indian rupee and prevent excessive fluctuations in exchange rates.
    • Addresses the need to prevent money laundering and illegal foreign exchange activities.
    • Promotes financial stability by aligning India’s practices with international standards.

    Objectives of FEMA

    • Facilitates cross-border transactions while contributing to overall economic growth and development.
    • Provides a flexible framework to adapt to economic changes and evolving global trends.
    • Requires periodic reporting from businesses, including an Annual Return on Foreign Liabilities and Assets (FLA) due by July 15 each year.

    ECGC - Export Credit Guarantee Corporation

    • Established in 1957, originally as the Export Risks Insurance Corporation, to protect exporters against payment risks.
    • Provides insurance coverage for commercial risks (e.g., buyer insolvency) and political risks (e.g., war or exchange transfer delays).

    ECGC Policies for Exporters

    • Shipments (Comprehensive Risks) Policy: Covers commercial and political risks for exporters shipping goods on credit terms to multiple buyers.
    • Shipments (Political Risks) Policy: Specifically protects against political risks affecting payment.
    • Multi-Buyer Exposure Policy (MBEP): Offers coverage for exporters dealing with multiple buyers, providing extensive protection.

    International Chamber of Commerce (ICC)

    • Founded in 1919 to promote international trade and cooperation in the wake of World War I.
    • Represents over 45 million companies globally, making it the largest business organization in the world.
    • Works closely with international organizations such as the UN, WTO, and G20 to advocate for favorable global trade policies.
    • Focuses on fostering open markets and sustainable economic growth for businesses of all sizes across various sectors.

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    Unit 2 - Guidelines and Regulatory Institutions PDF

    Description

    This quiz covers Unit 2 of the curriculum, focusing on the guidelines and regulatory institutions affecting international trade in India. Key topics include the role of the DGFT, RBI, FEMA, and ECGC, as well as the significance of export promotion councils and the International Chamber of Commerce (ICC). Test your knowledge on how these institutions impact foreign trade policy.

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