it is final presentation of international finance .i hope it will be better for understand international finance...........................

1. : SUBMITTED TO:
Dr. Sudhanshu Pandia

2. 1. Jyoti Pandey
2. Pawan Kumar
3. Anurag Katiyar
4. Shubham Yadav
GROUP - 11
International Indebtedness
Concept Of CAC
Pros And Cons Of CAC
Innovation In International Financial
instruments
NAME TOPICS

4. CONCEPT :
 The debt one government owes to a foreign government or
corporation.
Foreign debt may occur when one buys the debts securities
issued by another government.
While foreign debt can be advantageous because it may allow
a country to finance its development or other government
functions.
A government owing too much foreign debt (or too much debt
generally) may find itself beholden to another country. It is also
called external debt or international debt.

5. TYPES OF DEBT

6. LONG AND SHORT-TERM
DEBT
One way of classifying external debt is the two-
way scheme based on duration-long and short-
term.
Long term debt is defined as debt with an
original maturity of more than one year, while
short term debt is defined as debt repayments
on demand or with an original maturity of one
year or less.

7. EXTERNAL
DEBT
 Gross external debt, is a stock variable and is
measured at a point in time. External debt is
defined as “the outstanding amount of those
actual current, and not contingent, liabilities
that require payment(s) of principal and/or
interest by the debtor at some point(s) in the
future and that are owed to non-residents by
residents of an economy” {External Debt
Statistics - Guide for Compilers and Users,
International Monetary Fund (IMF), 2003}.

8. Multilateral and Bilateral Debt
 Multilateral creditors are primarily multilateral
institutions such as the International Development
Association (IDA), International Bank for
Reconstruction and Development (IBRD), Asian
Development bank (ADB) etc.
 Bilateral creditors are sovereign countries with
whom sovereign and non-sovereign entities enter
into one-to-one loan arrangements. Some of
India’s bilateral creditors who extend loans to both
sovereign and non-sovereign debtors include
Japan, Germany, United States, France,
Netherlands and Russian Federation.

9. Sovereign (Government) and Non-
Sovereign (Non-Government) debt
 Sovereign debt includes (i) external debt
outstanding on account of loans received by
Government of India under the ‘external
assistance’ programme, and civilian component
of Rupee Debt; (ii) other Government debt
comprising borrowings from IMF, defence debt
component of Rupee debt as well as foreign
currency defence debt and (iii) FII investment in
Government Securities.
 Non-sovereign includes the remaining
components of external debt.

10. Top Ten Reasons for Developing Nations
Debt
 Colonialism
 Poverty
 Lack of infrastructure
 Incapable/Untrained/Greedy leaders
 Misguided use of funds
Military regimes
 Uneducated workforce
 Un payable principles
 Uncontrolled population

11. The International Investment Position
 If a country runs a current account deficit, it borrows from
abroad and increases its indebtedness
 If a country runs a current account surplus, it lends to
foreigners and reduces its overall indebtedness
 International investment position =
domestically owned foreign assets – foreign owned
domestic assets

12. CURRENT ACCOUNT
 Current account balance: measures all current, non-capital
transactions between a nation and the rest of the world
 Current account has three main components:
 Goods and services =
the value of goods and services exported – the value of
imports
 Investment income =
income from investments abroad – income paid to
foreigners on their U.S. investments
 Unilateral transfers =
any foreign aid or other transfers received by foreigners –
that given to foreigners

13. The International Investment Position (cont.)
 A positive international investment position = the
home country could sell all its foreign assets and
have more than enough revenue to purchase all the
domestic assets owned by foreigners.
 In 2001, the U.S. international investment position =
$6,891 billion – $9,206 billion = –$2,315 billion

14. International financial flows, debt and equity combined, totaled
$1,184 billion in 2013, 11 percent higher than 2012. The increase
was driven by the 28 percent rise in net debt flows.

15. International Debt Statistics 2015 presents data and analysis
on the external debt of developing countries for 2013.
1. Net debt flows to developing countries increased to $542 billion in
2013, an increase of 28 percent over the comparable 2012.
2. However, the aggregates are heavily impacted by the rise in net debt
flows to China, which jumped to $139 billion, four times their 2012
level.
3. Net debt flows to developing countries, excluding China, were $403
billion, only 3 percent higher than in 2012.
4. External debt burdens in developing countries remained moderate.
The ratio of external debt to GNI averaged 23 percent in 2013, and
the ratio of external debt to exports averaged 79 percent.
International reserves stood at 111 percent of external debt stocks.
5. Countries reporting to the QEDS confirm that external debt levels in
high-income countries are, on average, much higher than in
developing countries, but they have moderated somewhat in 2013.

16. CAPITAL ACCOUNT
CONVERTIBILITY

19. Implies progressive integration of the domestic financial system with
international financial flows.
Regarded as one of the hallmarks of a developed economy. Signals
openness of the economy
Comfort factor for overseas investors. Encourages global capital flows
into the country
Indian businesses - access to cheaper external credit (Global rates +
Country risk) - without having to ask permission of the RBI.
High Risk – High Gain – Good Times – Chance of huge inflows of
foreign capital; Bad times – Chance of an enormous outflow of
capital
Chance of “export of domestic savings” - for capital scarce developing
countries this could curb domestic investment
Exposes an economy to extreme volatility on account of “hot money”
flows
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21. Increases competition and reduces inefficiency; aids price discovery
Allows access to funds at global rates (plus country risk)
Disciplines domestic policy and exchange rate monitoring.
Integrates economy to global trade and capital flows.
Capital controls ineffective with open trade, human movement.
Natural direction of evolution for Developing economies (globalization)
PROS OF CAC

22. Cons of CAC
No evidence linking improved growth to CAC (Bhagwati, Rodrik, Stiglitz)
Increases vulnerability to herd behavior, contagion, sentiment.
Downside exceeds upside – High Risk, High/Moderate Gain.
Reduces monetary, exchange rate autonomy for a nation.

24. Innovation ?
• Innovation can be
 Continuous
 Disruptive
• Innovation in
 Product
 Service
 Process
 Ideas
 Technologies

25. Why we don’t innovate ?
 Unproven business care
• Risk
• fear
 No need
 Barrier to entry
• IT investment
• Cost of capital and credit
• Getting customer to switch

26. Purpose of Innovation
 Different Type of Credit Control and
Macro-level Liquidity Management
 Matching Cash Flow Requirement of the
Fund Raiser
 Satisfying other Objectives like Retaining
Management Control
 Better Treasury Management

27. “We will fight our battles not on the
low road to commoditization, but
on the high road of innovation.”
Howard Stringer, Chairman & CEO,
Sony Corporation
Oct. 4, 2005
“Government support for scientific
research is not enough. We also
need to make sure that scientific
innovation gets translated into
applied uses in business.”
U.K. Prime Minister
Tony Blair
"Constant reinvention is the
central necessity at GE...
We're all just a moment away
from commodity hell.“
Jeffrey Immelt
Chairman and CEO, GE
“More and more
CEOs are adopting
an innovation
agenda.”
Sam Palmisano, IBM CEO
“Electronics Industry
Lacks Innovation,
Philips CEO Charges”
EE Times, Sept. 27, 2005
“Continuous innovation and the
full, unfettered expression of
human capacity are
indispensable to Japan's
economic rebirth and
revitalization.”
Japanese Prime Minister
Junichiro Koizumi
“Innovation is an essential component of corporate
survival.”
Anne Golden
President and CEO
Conference Board of Cda
Source: IBM
Innovation has become an important part of the
agenda for senior public and private sector leaders

28. Several sources of innovative ideas are actually
external to the organization
Source: IBM
0 10 20 30 40 50
Employees
Business Partners
Customers
Consultants
Competitors
Associations/Trade Groups
Internet Sales/Service Units
Internal R&D
Academia
* Respondents could select up to three choices
External Sources
of Innovation
Percentage of Respondents
Companies that relied
more on external
sources for
innovative ideas
outperformed other
companies.

29. Technology Enablers
Innovation Enablers
e-Business Strategy
Execution Strategy
Innovation Roadmap
Innovation Strategy
LOB*
IT
LOB
&
IT
* LOB = Line of Business

30. Business Model
Innovation Product
Innovation
Operations
Innovation
Business Function
Innovation
Services
Innovation
Technology Enablers
Innovation Enablers
e-Business Strategy
Execution Strategy
 Innovation Strategy
Innovation Strategy

31. Leadership
Governance
Change Management
Communications
Organization
Technology Enablers
Innovation Enablers
e-Business Strategy
Execution Strategy
 Execution Strategy

32. Foundation Phase
Transformation
Phase
Innovation Phase
Business
Extension
Phase
Technology Enablers
Innovation Enablers
e-Business Strategy
 e-Business Strategy

33. Conferences & workshops
Education gone public
Technology Enablers
Partner
collaboration
Innovation Enablers
 Innovation Enablers

34.  Technology Enablers
Social networking Video
Blogs 3G & IMS
Technology Enablers

35. FINANCIAL
INSTRUMENTS
 The basic documents issued to the large
body of investors when an organization or
institution raises the funds from a large
body of investors
 Standardized document as per statute or
governing institution containing features of
the relation between the fund raiser and
the user
 Limited formats

36. Purpose of Innovation
 Different Type of Credit Control and
Macro-level Liquidity Management
 Matching Cash Flow Requirement of the
Fund Raiser
 Satisfying other Objectives like
Retaining Management Control
 More Effective Catering to the Needs of
the Investors
 Better Treasury Management

37. BIBLIOGRAPHY

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