The Union Cabinet has approved India’s Currency Swap Agreement with the Japan. The $75-billion bilateral currency swap arrangement is a milestone in mutual economic cooperation and special strategic and global partnership between the two countries.
Currency Swap Agreements
A Currency swap agreement is the foreign exchange agreement between two parties to exchange a given amount of one currency for another and, after a specified period of time, to give back original amounts swapped.
How the Currency Swap Agreement can benefit India?
currency swap agreement can be beneficial to India in following ways:
currency swap facilities make it easier for India to pay for its imports. This aids in addressing challenge of depreciation.
Since Currency swap agreement involves trading in local currencies. Countries pay for the imports and exports through their own currencies rather than the involving a third country currency. This does away with charges involved in multiple currency exchanges.
currency swap makes it easier to improve liquidity conditions.
Currency swap agreements help in saving for a rainy day when the economy is not looking in good shape.
swap agreements also contribute towards stabilising country’s balance of payments (BoP) position.
agreement aids in improving the confidence in the Indian market.
Together with ensuring that agreed amount of capital is available to India, it also brings down the cost of capital for Indian entities while accessing the foreign capital market.
The Currency Swap Agreement was concluded between Prime Minister Narendra Modi and Japan’s Prime Minister Shinzo Abe during summit level meeting at the Yamanashi, Japan.
No comments:
Post a Comment