1. Prologue
  2. L3/P1: Balance of Payment (BoP) & Current Account Deficit
  3. L3/P2: Rupee Devaluation & Exchange rate regimes
  4. L3/P3: Capital account Convertibility & Tarapore Committee
  5. L3/P4: ECB quantitative easing & Greece Anti-Austerity


  • Sixth lecture was done on 20th February 2015, and uploaded on youtube. Total ~2:30 hours but I’ve split it into four parts.
  • PowerPoint of the lecture, available at Mrunal.org/Download
  • Medium of instruction- Hindi.
  • English version not possible for the moment, because I’m required to teach at this batch, in Hindi/Gujarati only. Besides, same content is available in English-text articles and English PPTs on the site.

L3/P1: Balance of Payment (BoP) & Current Account Deficit

Balance of Payment CAD Explained

  • Brief recap of the previous lectures
  • What is balance of payment (BoP)? Definition, methodology.
  • How is World’s balance of payment zero?
  • How is India’s balance of payment zero? And if so, why did we have a balance of payment crisis in 1991?
  • Two components of BoP: current account and capital account
  • Components current account balance: visible and invisible part.
  • Current Account: Services, income, transfer, gifts donations and remittances
  • Concepts: Balance of trade, trade deficit and trade surplus. Major imports and exports of India.
  • Calculating current account deficit and current account surplus.
  • Difference between FDI and FII
  • What is forex reserves? How is it built? What are the components of forex reserves?


L3/P2: Rupee Devaluation & Exchange rate regimes

Rupee Devaluation

  • if $1=50 or $1=60: who decides this exchange rate and how?
  • Fixed exchange rate regime: mechanism and limitations.
  • Floating exchange rate regime: mechanism limitations.
  • Difference between devaluation and depreciation of Rupee
  • Difference between revaluation and appreciation of rupee?
  • Historic trend of Indian rupee’s fall/weakening against US dollar
  • How does devaluation of the currency boost its exports?
  • Difference between NEER and REER? How does it help determining whether currency is undervalued or overvalued?
  • “Managed” floating extended rate regime.


L3/P3: capital account convertibility

UPSC Economy Study Material Capital Account Convertibility Tarapore Committee

  • What is “convertibility”? Why do we need to impose quantitative restrictions on convertibility between Indian rupee and foreign currency?
  • What is “full” current account convertibility?
  • What is capital account convertibility? Why does India have “partial” capital account convertibility?
  • Under FEMA, What are the quantitative restrictions put on current account and capital account convertibility?
  • What is capital account liberalization?
  • Features of Liberalized remittance scheme (2004)?
  • Arguments in favour and against of capital account convertibility and capital account liberalization.
  • How did full capital account convertibility lead to collapse of East Asian economies in 1997?
  • Recommendations of S.S.Tarapore Committee and why time not yet ripe for implementation of full capital account convertibility in India.


L3/P4: ECB quantitative easing & Greece Anti-Austerity

UPSC Economy ECB quantitative easing

  • Why does European Central bank (ECB) want to begin quantitative easing or Eurozone bond purchase program from March 2015?
  • Mechanism of ECB-QE.
  • Arguments in favour and against quantitative easing by ECB.
  • How does it affect India’s economic interests?
  • What is the Greece sovereign debt crisis?
  • Why has ECB refused to incorporate Greece Bond purchase in its QE program?
  • Why do Greek Leftist party “Syriza” and its leader Alexis Tsipras are pursuing “Anti-austerity” campaign?
  • Possible implications if Greece leaves Eurozone?