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balance of payments

I need help on the following assignment.

Investment Decision Selection Paper

A manufacturing organization considering expansion to India or Brazil.

Prepare a 500 word paper in which you relate the international flow of goods, services, and capital to the balance of payments and domestic economic behavior. Address the following:

1. Relate various balance of payments accounts to fluctuations of the exchange rates of the proposed countries over the time period.

Use the Internet to research balance of payments data. Use the following resources to research data related to the international flow of goods, services, and capital, and international economic and political conditions:

o U.S. Department of Commerce Bureau of Economic Analysis
o Economic Research Federal Reserve Bank of St. Louis
o International Trade Administration
o World Bank Group
o U.S. Census Bureau
o International Monetary Fund
o U.S. Commercial Service

The assignment makes reference to the company considering both countries as options for expansion. So they are looking to expand either into India or Brazil. I believe the assignment is essentially a comparison between the two.

You can probably get the historical exchange rates for both countries "over a 3-5 year period on a quarterly basis", and use that to write about how the exchange rate relates to "the international flow of goods, services, and capital to the balance of payments and domestic economic behavior".

please properly cite your references. Thanks.

Solution Preview

Let us take each country one by one and start with India.

As we know, India is one of the fastest growing and largest emerging markets in the world and has attracted huge amount of investment and foreign direct investment in the capital markets and other industries owing to buoyant economy, information technology and outsourcing boom, strong GDP growth and liberal government policies. The huge population and rising disposal income of the large middle class population has kept the country aloof from recessionary pressures. The domestic demand in the economy has prompted global players to set up or ramp up their presence in the country.

India's large pool of educated and English speaking workforce available at low salaries has been the backbone of outsourcing boom and major attraction for companies, both in manufacturing and services or even R&D sector, looking to set up operations or outsourcing operations in India.

For manufacturing firms, one of the major decision making criteria for setting up operations in a foreign nation is exchange rate scenario. India's currency, ie, Indian Rupee, has fluctuated quite a bit in the last few years against the US dollar. In the last three years, the dollar has depreciated upto 20% against the Indian rupee and then again appreciated in the last 1 year to the previous levels. Therefore, the exchange rate has shown 20% fluctuation on either side. For example, Indian rupees has appreciated from higher 40's per USD to Rs. 39 per USD and saw its value depreciated against the dollar to go as low as Rs. 52/per USD.

Hence, we can say that exchange rate has not been a cause of concern for ...

Solution Summary

Relate various balance of payments accounts to fluctuations of the exchange rates of the proposed countries over the time period.

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