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Kerala PSC Indian Economy Book Study Materials Page 424
Book's First Page15.10 ndian onom (iv) Government expenditure to be cut by 10 per cent per annum (the burden of soft currency salaries, pensions, subsidies, etc.). A term used in the foreign exchange market which The above-given conditions to which India was denotes the currency that is easily available in any obliged were vehemently opposed by the Indian economy in its forex market. For example, rupee corporate sector, opposition in the Parliament and is a soft currency in the Indian forex market. It is majority of Indians. But by the end of 1999–2000, basically the opposite term for the hard currency. when India saw every logic in strengthening its BoP position there was no ideological opposition hot currency to the idea. It should always be kept in mind that the nature of structural reforms India went Hot currency is a term of the forex market and through were guided and decided by these pre- is a temporary name for any hard currency. Due conditions of the IMF. to certain reasons, if a hard currency is exiting This is how the direction of structural reforms an economy at a fast pace for the time, the hard of an economy are regulated by the IMF in the currency is known to be hot. As in the case of the process of strengthening the BoP position of the SE Asian crisis, the US dollar had become hot. crisis-driven economy. The purpose has been served in the Indian case. India has not only heateD currency fulfilled these conditions but it has also moved ahead. A term used in the forex market to denote the domestic currency which is under enough pressure harD currency (heat) of depreciation due to a hard currency’s high tendency of exiting the economy (since it has It is the international currency in which the become hot). It is also known as currency under highest faith is shown and is needed by every heat or under hammering. economy. The strongest currency of the world is one which has a high level of liquidity. Basically, cheaP currency the economy with the highest as well as highly diversified exports that are compulsive imports A term first used by the economist J. M. Keynes for other countries (as of high-level technology, (1930s). If a government starts re-purchasing its defence products, life saving medicines and bonds before their maturities (at full-maturity petroleum products) will also create high demand prices) the money which flows into the economy for its currency in the world and become the hard is known as the cheap currency, also called cheap currency. It is always scarce. money. Upto the second world war, the best hard In the banking industry, it means a period of currency was the Pound Sterling (£) of the UK, comparatively lower/softer interest rates regime. but soon it was replaced by the US Dollar. Some of the best hard currencies of the world today are the Dear currency US Dollar, the Euro(€), Japanese Yen (¥) and the UK Sterling Pound (£). Meanwhile, by late 2015, This term was popularised by economists in early the IMF allowed the SDR to be denominated in 1930s to show the opposite of the cheap currency. the chinese ‘Yaan’–paving the way for a new hard when a goverment issues bonds, the money which currency to be implemented in 2016. flows from the public to the government or the