ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Subhalakshmi SircarSubscribe to Subhalakshmi Sircar

Risk Premium in Foreign Exchange Market

This paper investigates the nature of risk in the context of the Indian foreign exchange market in terms of deviations from the uncovered interest parity condition during 1997-2006. Two tests have been used to measure these deviations. The first is the statistical measure of risk premium defined as interest differentials between two countries (here India and the us) adjusted for expected depreciation of the exchange rate. A positive value of such a measure essentially means that higher interest rate differentials reflect a systematic risk, exchange rate risk being a part of it. The other is regression analysis using monthly data. The mean of the average of risk premium is found to be positive and statistically significant for government bonds across all maturities. However, in the regression analysis, there is evidence of risk premium only for government bonds with a 10-year maturity period. Overall, the results confirm the presence of a systematic risk associated with investments in India compared to those in the us.

Status of Agriculture in India

This paper looks at trends in the growth of agricultural production in India over the last one and a half decades, identifies factors that affect agricultural growth and analyses constraints that have affected growth in the sector. On this basis, projections have been made on the future growth of the sector in the medium term, coterminous with the Eleventh Five-Year Plan. All-India level and state-wise analyses highlight the role of public investment/ government expenditure on agriculture as being the crucial determinant in stepping up the rate of growth of agricultural production. Given other factors, a consistent increase in public investment to 15 per cent per annum should lead to agricultural growth of 4 per cent, which is concomitant with the projected growth rate in the Eleventh Plan. The other factors that are important for a higher agricultural growth are fertiliser usage and agricultural prices.
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