Q.25. Identify the objectives of exchanges
control?
OBJECTIVES OF
EXCHANGE CONTROL
The following are some of the
objectives of exchange control.
To restore
Equilibrium
The chief objective of exchange
control is to restore equilibrium in its balance of payments. If a country
finds that its balance of trade has been persistently unfavourable then it must
do something set it right. The balance of payment must ultimately be made to
balance.
To Protest
Home Industries
Another objective of exchange control
is to protect the home industry from unfettered competition from abroad if the
people at home are more interested in purchasing foreign goods it will
ultimately discourage the local producers to produce more. It will directly
affect the National Income and the domestic Gross Product of the country.
To Conserve
Foreign Reserves
To conserve foreign reserve is
another major objective of exchange control. Every Country needs foreign
exchange in order to maintain its stability monetarily in the present age. Also
the countries need foreign exchange to make payments for their imports and to
pay back their debts obligation. For this a country must have foreign
currencies on their hand. If there is a deficiency of the foreign exchange it
is going to affect its liquidity position internationally and its credit
rating.
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