CA Foundation · Business Economics · International Trade
Amrita Industries exports textiles to Bangladesh. The rupee appreciates against the Bangladeshi taka. In terms of international competitiveness, which statement best describes the immediate impact on Amrita's exports?
When the rupee appreciates against foreign currencies, Indian exports become more expensive for foreign buyers because they need to pay more of their own currency to buy Indian goods. This reduces the international competitiveness of Indian exporters like Amrita Industries.
- AAmrita's textiles become cheaper for Bangladeshi importers, increasing export demand
- BAmrita's textiles become more expensive for Bangladeshi importers, reducing export competitivenessCorrect
- CThe exchange rate has no effect on export competitiveness in the short term
- DAmrita must immediately reduce production to match lower export volumes
Explanation
When the Indian rupee appreciates (strengthens) against the taka, the same rupee price now requires more taka from the Bangladeshi importer. This makes Indian goods relatively more expensive abroad, reducing export competitiveness. Option 0 reverses the effect; Option 2 ignores exchange rate impact; Option 3 assumes a reaction that may not be immediate.
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