"India is taking huge leaps in the index of Ease of Doing Business, as a result many MNCs are shifting their production base to India." In the light of the above statement, comment upon the flow of foreign exchange and its likely impact on the Indian Economy.
CBSE 58-1-1 PAPER SET 2020
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India, with greater ease of doing business, may attract many more MNC’s to shift their production base to India, thereby increasing the inflow of foreign exchange (say $) to the Indian economy. This increase in foreign direct investments (FDI) by MNCs will lead to increase in the supply of foreign exchange in India leading to a fall in the rate of foreign exchange, i.e. Indian Rupee (₹) may appreciate. Increase in FDI will result in increase in production and hence may also generate employment opportunities in the Indian economy.
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