Analyzing International Trade Finance and Investment Dynamics

This report provides an analysis of international trade finance and investment, focusing on how financial markets allocate capital within domestic and international economies. It evaluates emerging economies, highlighting challenges related to industrialization and trade policies. The report dis...Read More

International Trade
finance and Investment
EXECUTIVE SUMMARY
For the investors in order to make investment it is the major concern. Hence, it should
appropriately investigate in the chance that it is making an investment. It should need to have full

understanding regarding the economy in which it wants to invest. It is essential to possess
understanding as well as knowledge regarding the several firms that are operating on it. Here, the
economy of the India is determined as it is one of the largest developing economy of the globe. It
also discusses about the way in which the funds in allocated with the international as well as
domestic economy.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION ..........................................................................................................................4
TASK...............................................................................................................................................4
Evaluate how the financial markets work to allocate capital.................................................4
Brief background of financial market:...................................................................................4
Critically evaluate an emerging economy about the challenges faced by them because of
industrialisation and trade policies.........................................................................................8
Evaluation of emerging economy...........................................................................................8
Different types of challenges which has been faced by the country because of various types of
trade policies and industrialisation :-....................................................................................10
CONCLUSION .............................................................................................................................11
Recommendations..........................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
The economics of world are fluctuating rapidly and many of the nations of the globe
involving developing nations are gearing up to the issues of competing in a majorly integrated
international market area. At those circumstances, the challenges of international trade is gaining
major attention of the policies makers, traders and government authorities in the past years. The
following report will cover about the judgement on how the economical marketplace to work to
assign capital in a domestic efficiency and multinational term for commerce, investment, and
growth aims. Moreover to this, it will involve about the utilisation an efficiency of your choice
critically evaluate what are the fundamental issues that nations faces due to manufacture and
trade plan of action.
TASK
Evaluate how the financial markets work to allocate capital
Brief background of financial market:
Debt market can be refers to the area in which the investing practices of the sale as well
as purchase are attained with the help of the several loans. It provide low rate of the investment
and includes lower risk (Bhattacharya, Okafor, and Pradeep, 2021). Also the payment of the
interest is rigid in the financial markets such as debentures, mortgages and bonds as well.
Moreover to this, equity market is also known as the stock market where equity
instruments as well as securities are traded. The ROI in such markets are commonly high and at
the similar time it pay of the more risk. The chance of risk element in it is directly allied to the
anticipated rate on the return. In addition to this, the rate of the dividend is not at all fixed. For
like, equity stocks of the firm is listed on the London Stock Exchange.
Both the following markets have few of the essential operators who have the power in order to
effect them to their full extent. The players are mentioned below:
Key Players of Financial Market
Investors
Borrowers
Lenders

 Lenders – Lenders act as the mediator for the borrowers and the investors. They take
money from the various investors and lend that money to the borrower and charges few
interest on it. These mediators are usually banks and other financial institutions. Many of
the time organisations also provide loans to the other organisations. There are also
various private lenders that offers their capital to the other people in order to gain interest
over the amount given.
 Borrowers – These are the seekers of the capital. These individuals are in requirement of
money in order to invest that money into their business. Borrowers takes the capital from
the public, in the kind of issuing them debentures as well as shares, several bonds, loans
from the various financial organisations etc.
 Investors – These are the individuals who invest their capital into the businesses or
organisations in order to earn. Investors are the depositors of the capital that deposit their
money with several fiscal organisations such as banks and invest their capital in share
market by buying debentures or shares. They offer their own capital to others with the
aim of gaining more revenue in kind of dividend or interest.
Domestic economy and capital allocation:
Allocation of the capital refers to the method of dividing the most advantageous and
effectual technique in that the fiscal resources of the management are financed by which the
value of the equity for the share owners can be enhanced and the gains of the organisation can
also be increased (Al Hawaj, and Buallay, 2021). In addition to this, they focus on the risk
element while choosing the technique. For example, the Barclays bank is given the duty of
allocating capital to several policies. They evaluates several features like availability of the
resources, need of the work and the success rate of the understanding the amount to several
programmes. In the local economy there are major players that works on the operations of the
capital allotment.
Key Players of Capital allocation System
Banking System

Domestic market
Stock market
 Banking system – Banking plays an essential role in the allocation of the funds by taking
savings and utilising the capital in order to avail the funds to required people in the type
of loans. In this process banks works as a mediators for arranging the fluctuations of the
amount. Various banks works on the policies for distributing the capitals and fixes the the
amount like for monitoring the movement of the funds. The current monetary policy of
the country has been made with the aim of addressing the target rate of inflation which is
2% and accordingly with the requirement of accomplishing sustainable employment and
growth.
 Domestic Money Market – This market allocate the funds by taking lower term deposits
from the people and offer them as lend for the long time period to the firms. These
markets usually deal in low term capitals. The method of this markets are commercial
papers, treasury bills and also deposits (Atakhanova, 2021).
 Stock Market – This is the area in which all the debentures and shares of the firm are
traded in order to satisfy the investment need of the organisations. The London Stock
Exchange is the comptrollers of the stock market and all the stocks that are listed in it
only can trade the shares. AIM is the portion of the London Stock Exchange for medium
size as well as small size organisations. By it can create utilisation of stock exchange and
possess the admittance to the investors.
The allocation of the capital in the local economy may be obtain by providing the organisations a
approval to take the amount apart the local medium of exchange only. It will assist the stock
trade to determine the counterpart the capital of medium of exchange of the borrowers and while
it will minimise the potential risk. The nation's GDP will also gets better and can fix a bench
mark of pricing of the citizens of the nations to eliminate the fiscal risk (Munasib, Roy, and Tian,
2021).
 International Economy and capital allocation:
International capital market refers to the fiscal area at the world stage where the medium
of exchange, bond, mutual funds, stock and other fiscal certificate which are being purchased
and sell. There are several markets in this which is mentioned :

 Commercial Banks –This type of banks make a abstraction among the several state by
operating the working of money transaction and linking the bank accounts at the world
wide stage. Just like local banks they are also ready to take all the amount and offer
currency to several nations or consumers from several countries.
 Security Market – It helps in trading them around the borders. This attain investors from
the global market in order to invest in bonds as well as trade that. Bonds are issues by the
firm as a non local entity. Majorly this market trades in dollars as well as Euros (Gabor,
2021).
 Global Stock Market – It refers to the global level of the market which negotiate their
goods with the local organisations. The supports the investors to acquire shares of the
various state without a issue. It supports in offering capital to the nation that is not
confident to arrange money from their own.
 Derivatives – It is used in order to manage the equilibrium in transaction rate for trading
merchandise the world stage. quantity of the derivatives are basically agreed on the
fiscal asset.
By the support of the fiscal tools and the markets which the nation can utilise the
technique of hedging that will assist in minimising the risk of the finance and earn high market
share for the nation. As it is profitable the efficiency of the country (Lashitew, 2021).
Discuss about the trade, financial and investment theories:
In accordance to the Ricardo, countries that manufacture products with the sole element
of manufacturing that is commonly the labour that do not operate cross nation but also fluctuate
in the several industry. They gets regular returns and there is appropriate challenges in the
market area. The two concept linked to it are as follows -
 Competitive Advantage – In the economic model, mediators have the edge over their
competition as well as on others for producing the certain kind of the product which can
be produced at the lower price and it can be made at the cost that is lower than the cost of
margin of the trade. It shows the reality of the revenue earned from the variances
happening because of the technological variations. It offers statement in favour of the
trade as well as specialization in the nations. It becomes more difficult hence the method
was shifted to the realistic area (San-Jose, Retolaza, and Van Liedekerke, 2021).

 Absolute Advantage – In accordance to this theory, concept of the economy is utilised in
evaluating the ability of party in making better goods. It refers to the making a certain
quantity of the products at the lower price. In accordance to this theory, in respect to
being more rich it is important for the firm or nations to be more specialisation in the
goods they make and the offered facilities as well. They should make a product that
possess some of the perks and also must include themselves with such nations that can
offer them trade facility that is free.
Discuss the endeavour of the following management in international trade:
International trade means to the dealing of the capital, products, facilities and monetary
term around the territories and borders. The products are transferred from such nations that have
surplus to the country where there is shortage of it. There are several firms operating in it:
 World Trade Organisation – It requires lots actions for promoting trade at the global
level. It makes rules that monitor the working of the export and import. It resolves all
kinds of the conflicts that occur among the countries linked to the trade. If the trade
barriers are lifted up which were become the issues in the usual working of the trading at
the international level (Cieślik, 2021).
 Regional Trade Agreements – These section will assist in lower down the price of the
trade and measuring the laws for the economics in order to functioned in it. As due to
this, nations got a large market area at the global level in which the y can maintain their
sale of the products at the lower cost and enhance their rate of the margins. This return is
motivated the economy in order to develop by enhancing the worth of the export and the
countries can enhance their GDP section.
 Investment treaties between states – These written agreement assist the firms, nations
or the capitalist in securing them from the grown-up country's abuse or conduct. They
restrict the financing political party from any type of the bad treatment or discrimination
which is not even-handed. It offered protection top the nation and motivate them to invest
in different states as well (Sokhanvar, and Jenkins, 2021).

Critically evaluate an emerging economy about the challenges faced by them because of
industrialisation and trade policies.
Evaluation of emerging economy.
Emerging economy means to the country which is not developed and it is under the
portion of the developing nations economically. It is provided to the countries at the time when it
enhances its react to the global stage and initiate dealing in the global market at the bug stage in
context to the finance, trade as well as investment. Here, the economy selected for the evaluation
is India. Respective firm is a rapid growing economy transitioning in all type of the international
trades. The GDP of the nation is $ 2.62 lakh crores currently that is the second largest at the
international level after the United Kingdom. But focusing deep into it last few years like almost
last 5 years , the GDP of the nation is lowering down consistently (KASUYA, 2021).
By the above chart it is very much appropriate that the GDP growth of the firm is lowering down
regularly. The growth rate of the GDP of the nation is focused on the rates of its domestic
currency. Analysis of the economy of the India on following terms are mentioned below :
 Agriculture – It is the most essential industry of the growth of the Indian economy. It
has been seen that around 58 % population of this country is focused on it. It includes
fishing, farming and forestry as well. The gross value included by it for the year 2020
was understood to be around Rs. 19.48 Lakhs Crores that is $ 276.37 billion is US
dollars. It is accounted for the amount of 17.8 % share in the countries economy at the
existing rates (Agyei-Mensah, 2021). As due to the need in the pandemic covid 19 the
economy faced a lot of pressure. As because of the lock down, the usable income of the
people declined that gives outcome in their lower in the buying. In order to handle this,
the government has to declare various of the subsidies for this area. The export industry
was also impacted but it is optimistic as it enhanced by the 17.34% that proved to be
more advantageous for the country.
 Producing – The initiative of the “Make in India” campaigns is being considered as
one of the biggest programme for the better for this industry. It give recognition to the
country at the international level (Scott, and Martens, 2021). It has also enhanced the
chances of the employment in the country. This industry is placed at the second for
enhancing the country's GDP after the agriculture. India's administration also take lots of
steps in order to boost in this division for like MUDRA, start up India and various more.

This outcome in the 25 % growth in it. This industry is also focusing to spend big capital
on the industry's research and development. In the year 2019, the export term of this area
was almost around 43 %.
 International Trade – It is the activity in which the products and services are exchanges
with the nations at the international stage. It is essential for the country to work more on
export than imports. Moreover to this, if products refers to the firm is concentrating of the
inflow of the investment at the time when many imports represents the nation is
disbursement more than their gains and their currency is go out. Balance of the nation
usually managed if they are exporting more (Andiansyah, 2021). Currently, the balance
of the trade of the country is going negative and also it is representing a decline in the
percentage of the economy in the year 2020.
 Rising prices –it has been seen that increase in the rates of goods and services over the
particular time period. It is the essential tool that shows the betterment of the country.
The degree with which the enhancement in the rates of several element occurs that impact
the overall economy. It majorly has the effect on their living standards. The rate of
inflation of the country impact their interest rates of the financial institutions, pension
rates and various more.
Different types of challenges which has been faced by the country because of various types of
trade policies and industrialisation :-
Industrialization is the method in which the community and economy of the entire sector
fluctuates (Gamso, and Grosse, 2021). It includes the change of the manual work into the
automated machine but there are few issues which are faced by the nation because to
industrialisation and the trade policy which is mentioned below:
 Corruption – As because of the industrialisation the level of the corruption of the India
has increased. Currently, the politicians initiated started demanding more money in order
to approve their working in the industry. It has impacted negatively to the economy of the
nation where people do not have to bear the corruption level due to this they are not able
to set their regarding factories.
 Tax Issues - India has to encounter issues regarding taxed as it was not capable to
charge more tax from these industries and they need to alter their policy. In order to
enhance the number of the companies it has enhanced the rates of income tax. The

government was facing more lack of capital in order to aid these firm and need to
enhance the taxes.
Problems faced by India due to Trade policy:
India was in the situation that the country need to move on with their policies of trade or
not. It is due to by tapping into the agreement, nation need to eliminate all kinds of barriers and
need to allow all the external players. It impacted the home sellers as the desire of the goods of
these people declined. Moreover to this, currently the country need to import goods if the other
countries are keen to export their merchandise (Gnangnon, 2021).
CONCLUSION
From the report it has been concluded that the fiscal marketplace has an essential
character in funds allocation to the nation. There are several players that concentrates on the
appropriate allocation or distribution of the capital in order to make these resource useful or
these resources can be utilised effectively as well as efficiently. In the local level, share market,
private lenders, banks manages all these practices. Whereas at the global stage it is done by the
international monetary funds and world bank as well. WTO with their other organisations
operates the work of managing the operations at the global level.
Recommendations
From the above mentioned report, it has been recommanded to the investor of the
organisation is that:-
 Investors should invest their amount in different parts, few of it in debentures and some
in equity which lead to the low risk.
 Investors need to debar their investing in the global markets and it if does not have
appropriate understanding regarding that.
 There are several techniques in which a firm can invest and it can invest in any nation by
collaborating a partnership with other organisation that already understands the working
of the particular nation.

REFERENCES
Books and Journals
Gnangnon, S.K., 2021. Manufacturing exports and services export diversification. The
International Trade Journal, 35(3), pp.221-242.
Gamso, J. and Grosse, R., 2021. Trade agreement depth, foreign direct investment, and the
moderating role of property rights. Journal of International Business Policy, 4(2),
pp.308-325.
Andiansyah, F., 2021. The Influence of Financial Inclusion and Macroeconomic on Foreign
Direct Investment (FDI) Flows in The Organization of Islamic Cooperation (OIC)
Countries. Optimum: Jurnal Ekonomi dan Pembangunan, 11(1), pp.71-91.
Scott, F. and Martens, C.P., 2021. International project finance. BRILL.
Agyei-Mensah, B.K., 2021. The impact of board characteristics on corporate investment
decisions: an empirical study. Corporate Governance: The International Journal of
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KASUYA, M., 2021. AVOIDING EXCESSIVE RISKS AND INVESTING IN INIMITABLE
COMPETENCE IN THE INTERNATIONAL AND SECURITIES BUSINESSES.
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Cieślik, A., 2021. MNE activity in poland: Horizontal, vertical or both?. Emerging Markets
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San-Jose, L., Retolaza, J.L. and Van Liedekerke, L. eds., 2021. Handbook on Ethics in Finance.
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Gabor, E., 2021. Keeping ‘Development’in a Multilateral Framework on Investment Facilitation
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Munasib, A., Roy, D. and Tian, X., 2021. Differential impact of the Great Recession on foreign
and domestic firms in China: Did processing trade play a role in export performance?.
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Mineral Economics, 34(1), pp.141-150.
Al Hawaj, A.Y. and Buallay, A.M., 2021. A worldwide sectorial analysis of sustainability
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