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Kerala PSC Indian Economy Book Study Materials Page 614Book's First Page
22.48 ndian onom Debt sWAP Such funds, estimated to be sitting on a total of $25 trillion, are eagerly looking to diversify into Exchanging one debt by another for a fresh term higher yielding riskier assets. Any fast growing of repayment schedule at the same or usually economy with open and liberal attitudes to foreign lower interest rates. investments with opportunities for investment interest rAte sWAP may face up the inflow of such funds. India is one fit candidate today. Exchanging one debt of a particular interest rate Such funds need to be studied and alllowed for another at lower interest rate. entry cautiously as they bring in non-market and ProDuct sWAP extraneous factors with them too, having potential diplomatic, strategic and sovereign dangers to the Exchanging one product for the other as wheat for host economies. In November 2007, the National milk (similar to barter). Security Advisor of India voiced apprehension about such funds. swift The Society for Worldwide Inter-bank swiss formulA Telecommunication (SWIFT) is a messaging Tariff cut formulae are either linear or non- network which connects banks and financial linear. A Swiss formula is a non-linear formula. institutions across the world. International In a linear formula, tariffs are reduced by the same transactions of the banks and institutions are percentage irrespective of how high the initial ultimately based on this network. The network tariff is. As opposed to a linear formula, in a non- was in news in India after the LoU (Letter of linear formula, tariff cuts are directly or inversely Undertaking) related banking fraud occurred proportional to the initial tariff rate. with the Punjab National Bank by February In the Swiss formula, tariff cuts are 2018. Meanwhile, the RBI has enforced (February proportionally higher for tariffs which are initially 2018) a new guideline under which all banks and higher. For instance, a country which has an financial institutions of India need to link their initial tariff of 30 per cent on a product will have core banking system to the SWIFT to protect to undertake proportionally higher cuts than a themselves from occurrence of any future financial country which has an initial tariff of 20 per cent fraud. on the same product. In the on-going multilateral trade negotiations swfs at the World Trade Organisation (WTO), it has Sovereign wealth funds (SWFs) are the foreign been decided by all participating countries to use currency funds held by the governments of the the Swiss formula for reducing import tariffs on world, specially in Asia and West Asia. After the industrial goods. After a long-standing debate process of globalisation, freer capital movements on the number of reduction coefficients to be to the developing economies had brought enough used in the formula, a unanimous decision was foreign currencies to some economies. Earlier, such recently taken that there would be two sets of funds used to originate in Singapore and Norway coefficients—one for the developed countries and but now we see china, Russia, and the Middle East another for developing countries. A decision on emerging as the new SWFs economies. the value of the coefficient is yet to be taken.