Devaluation is the official reduction in a country's currency by its government. The difference between devaluation and depreciation is that devaluation is done by the country's government whereas, depreciation happens due to market forces.

1. DEVALUATION v/s QUANTITATIVE
RESTRICTIONS
Guided By ~ Presented By ~
Prof. Deepa Dawar Isha Joshi
BFT – VI semester

2. CONTENTS
Quantitative Restrictions
Import Quotas
Tariff and Non Tariff Barriers
Export Promotion
Devaluation
Objectives of Devaluation
How Devaluation of a currency works to improve BOP?
De-merits of Devaluation
Conclusion
Isha Joshi

3. QUANTITATIVE
RESTRICTIONS
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4. Quantitative Restrictions
Specific limits on the quantity or value of goods that can be
imported (or exported) during a specific time period.
Example - An example is an import quota, where a quantitative
restriction on the level of imports is imposed by a country.
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5. QUANTITATIVE RESTRICTIONS
IMPORT QUOTAS
EXPORT
PROMOTION
TARIFF
BARRIERS
NON - TARIFF
BARRIERS
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6. Import Quotas
Fixing of import quotas is a device used for correcting an adverse
balance of payments.
Under the quota system, the government may fix and permit the
maximum quantity or value of a commodity to be imported during
a given period.
By restricting imports through the quota system, deficit is reduced
or eliminated and thereby the balance of payments position is
improved.
Isha Joshi

7. Import Quotas : Tariff Barriers
Tariff is a customs duty or a tax on products
that move across borders. The most
important of tariff barriers is the customs
duty imposed by the importing country.
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8. Main Tariff Barriers
1) Specific Duty
2) Ad Valorem Duty
3) Combined or Compound Duty
4) Sliding Scale Duty
5) Countervailing Duty
6) Anti – Dumping Duty
7) Protective Tariff
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9. Import Quotas : Non – Tariff Barriers
A non tariff barrier is any barrier other than a
tariff that raises an obstacle to free flow of goods
in overseas markets. Non-tariff barriers, do not
affect the price of the imported goods, but only
the quantity of imports.
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10. Main Non – Tariff Barriers
 Quota System
 Tariff/Customs Quota
 Unilateral Quota
 Bilateral Quota
 Multilateral Quota
 Product Standards
 Domestic Content Requirements
 Product Labeling
 Packaging Requirements
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11.  Preferential Arrangements
 Foreign Exchange Regulations
 Other Non – Tariff Barriers (like health and safety
regulations, technical formalities, environmental
regulations, embargoes, etc.)
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12. Export Promotion
To correct disequilibrium in the balance of payments, it
is necessary that exports should be increased.
Government may adopt export promotion programs for
this purpose. An export promotion program includes
subsidies, tax concessions to exporters, marketing
facilities, incentives for exports, loan priorities to the
export sector under the credit policy of the central bank,
etc.
Isha Joshi

13. DEVALUATION
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14. Devaluation
Devaluation refers to the official reduction of the
external values of a currency. The difference between
devaluation and depreciation is that while devaluation
means the lowering of external value of a currency by
the government, depreciation means an automatic fall in
the external value of the currency by the market forces;
the former is arbitrary and the latter is the result of
market mechanism.
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15. Thus, devaluation serves only as an alternative method
to depreciation. Both the methods imply the same thing,
i.e., decrease in the value of a currency in terms of
foreign currencies.
Both the methods can be used to produce the same
effects; they discourage imports, encourage exports and
thus lead to a reduction in the balance of payments
deficit.
Isha Joshi

16. Objectives of Devaluation
1) To Encourage Exports
2) To Discourage Imports
3) To Correct the Balance of Payment
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17. How Devaluation of a Currency works to
improve BOP?
• As a result of reduction in the exchange rate of a currency with
respect to foreign currencies, the prices of goods to be exported
fall, whereas prices of imports go up. This encourages exports and
discourages imports.
• With exports so stimulated and imports discouraged, the deficit in
the balance of payments will tend to be reduced. Thus, policy of
devaluation is also referred to as “expenditure switching policy”
since as a result of reduction of imports, people of a country
switches their expenditure on imports to the domestically
produced goods.
Isha Joshi

18. De-merits of Devaluation
1) Devaluation is a clear revelation on the country's economic
weakness.
2) It reduces the confidence of the people in country's currency and
this may lead to speculative outflow of capital.
3) It encourages inflationary tendencies in the home country.
4) It increases the burden of foreign debt.
5) It involves large time lag to produce effects.
6) It is a temporary device and does not provide a permanent
remedy to correct adverse balance of payments.
Isha Joshi

19. CONCLUSION
DEVALUATION
• Policy of Exchange Rate
protection
• Less retaliation among traders
• For Devaluation to be
successful in improving the
competitiveness of tradable
goods, ‘real wages’ must fall
• Brings revenue to exporters
QUANTITATIVE RESTRICTIONS
• Commercial policy protection
• More retaliation among traders
• Quantitative Restrictions are
just a way of taxing profits of
exporters
• Brings revenue to the
government
Isha Joshi

20. Isha Joshi