This International Finance Project is dedicated to:
Dr. Mohammed Magableh
Fawaz.M & Bandar.K
200600729 & 200600279
International finance / Indian Rupee
U Mate International Company Product offering Profile:
We have selected the Indian Rupee currency comparing to the U.S Currency.
There is a MNC called Arizona, which manufactures and upkeeps the dynamic usage of the
organic products for the sake of having better plant growth that been added to soils to develop
the most plants, to get the better outcome. U-Mate International Company chose India to export
their products and services because of the 70% population in India depend on agricultural action,
and also this company has presence in large areas in Northwest New Mexico where known
deposits of fulmic, ulmic and humic acid as well as other organic products discovered. Then,
those products are frequently known as humates. The rights are in areas where large quantities of
higher quality of humates are discovered. Humates are collected from the ground, powdered,
moved into hard form, and then packaged into solution and sold under many different brand
names including U-Mate™, Humates in Action™, Bio-U-Mate™, New-Mex U-Mate™ and
New-Mex Humate.
Current Account Analysis:
We can see that Indian’s net current account has been decreased during those 10 years. But in
2010 according to (Mr. Nelson’s sheet), Indian’s current account in December 2010 is -52001
million USD. This shows that India actually import more than they export even with their
second largest labor force in the world. On the other hand, this fits smoothly to India's
comparative advantage which is strength in skill-intensive trading services such as software
development, engineering, information technology and chemical products. So rather than
producing labor intensive manufacturing product e.g. cars, they just import it from other Asian
(low labor cost) countries e.g. Kuwait, their tenth largest trading partner, other countries like
USA then they buy services like telephone line and call center from India, which is one of their
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main exports. In contrast, imports Capital goods and fuel, account for about a quarter of the
International finance / Indian Rupee
imports.
In
the
future
India
could
also
potentially
gain
higher
exports.
(busienomics.wordpress.com, 2012)
Indian Import restriction list:
India is one of the major importers of many goods but they are certain items that import is
allowed through actual users only. The restrictive import goods are classified as consumer goods;
precious and semi-precious stones; products related to safety and security; seeds, plants and
animals; some insecticides, pharmaceuticals and chemicals; some electronically items; several
items reserved for production by the small-scale sector; and 17 miscellaneous or special-category
items. And the U mate international can export their products easily to Indian companies as U
mate offers so many unique product that are in high demand in Indian industry.
Global nutrient Consumption (kg per hectare of fertile land)
India consider the fifth country in the world in term of nutrient Consumption, that’s will give U
mate Inc. the opportunity to export this type of organic product to compensate the deficit that
India have in Nutrient. However, this process would increase India’s import. Therefore, |India's
deficit would increase during the given period. However, U Mate did choose U.K because the
level of competition is significantly high and that applied also on China, Germany and Pakistan.
Business Potential to India
The business potential for fertilizer in India as we observe increased dramatically during 2010.
The imports of fertilized products increased significantly during 2010 also the consumption
compared to previous years. But what is U mate Inc may take in consideration is the India
government needs.
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support their imports to India and establish a good chain to fit the consumptions of Indian
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productions of fertilized product decreased significantly during 2010 and that will give U mate
International finance / Indian Rupee
Also we can mention the increased in India population and the impacts of this increase lead to
increase the demand of U mate products. Therefore, the company’s products should have fixable
properties in order to fit the needs of this increase in population.
Analysis of imports and exports of India
There is lot of business potential for this company as India offers big opportunities where the
deficit between export and import of fertilizers are increasing year by year and there is huge
potential as rising population demand and joint venture for international company offer unique
business opportunity of U mater international company to explore. India had lot of business
potential in chemical and organic products business which had been target by U mater
international for opening up the business as this country had not banned any chemical or organic
products import restriction.
Foreign Exchange Market:
A floating exchange rate system under which the central government make sure that the currency
value is manageable by intervening any major fluctuation in its value due to country balance of
import or export to either appreciating or depreciating value and Indian government always
balance the Rupee/Dollar ratios needs to be stable in order to protect country balance of payment
and encourage export over imports to improve current account balances.
Indian rupee:
The INR presently depreciating due higher demand of dollars from importers and concern over
widening current account deficit and recently the INR value against dollar dip as low as for each
1 US dollar equals to 6.1 INR.
They are various factors for devaluing of Rupee against the international currencies like US
dollars.
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INR.
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The Country central bank takes many calls by selling the dollars from its reserve to stabilize the
International finance / Indian Rupee
Using Currency futures and Option:
The Indian currency movement from last 7 years gives the indication that INR value had been
depreciated over the years so in this case selling INR futures options is good idea to safeguard
their investment in India ventures. The finance Department of U mate can sell currency futures
contract hedge against the deprecating the rupee trend.
U mate international Co. can buy option contract holds the right but not the obligation, to buy or
sell the currency at a mutually agreed price on or before a certain date before the maturity
Therefore, on the expiration date if the ongoing rate is favorable as compared to the option strike
rate, the buyer of the option can walk away from the option contract.
Current USD/INR Price:
The U mate company makes a call option, which is giving the right to buy the currency, while
the put option gives the U mate co the right to sell the currency. The U mate co. can have the
option pay at a price to the seller which is called “Premium”. Thus the loss for the option U mate
Co. is restricted to the option premium paid, while it allows the buyer to benefit from favorable
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movements in the currency.
International finance / Indian Rupee
References:
1) www.hindu.com/2008/07/07/stories200807.
2) http://www.investopedia.com/articles/forex/09/exchange-rate-risk-currency3) www.umateinternational.com
4) International financial management book By: MCheol S. Eun Williams Professor at Georgia
Tech
5) http://www.google.com.sa/search?hl=en&tbo=d&site=&source=hp&q=Current+USD%2FIN
R+Price&oq=Current+USD%2FINR+Price&gs_l=hp.3...0.0.0.973.0.0.0.0.0.0.0.0..0.0.les%3
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B..0.0...1c.2BLpuAnqATw