(i) Financial Sector (Banking and Non Banking)
(ii) Insurance
(iii) Telecommunication
(iv) Hospitality and Tourism
(v) Pharmaceuticals
(vi) Software and Information Technology

(i) Exchange control means the state intervention in the forex market.
(ii) It is a popular method employed to influence the balance of payment position of a country.

There are three main types of BOP
(a) Cyclical Disequilibrium
(b) Secular Disequilibrium
(c) Structural Disequilibrium

According to Ricardo a country can gain from trade when it produces at relatively lower costs. Even when a country enjoys absolute advantage in both goods, the country would specialize inthe production and export of those goods which are relatively more advantageous.

The rate at which goods of one country are exchanged for that of another country i.e. ratio of export price and import price.

(i) According to Adam Smith, the basis of international trade was absolute cost advantage.
(ii) To Ricardo the basis of trade is comparative cost advantage.
(iii) Trade can take place even if the absolute cost difference is absent but there is comparative cost difference.

1. There are only two nations and two commodities (2 x 2 model)
2. Labour is the only element of cost of production.
3. All labourers are of equal efficiency
4. Labour is perfectly mobile within the country but perfectly immobile between countries.
5. Production is subject to the law of constant returns
6. Foreign trade is free from all barriers.
7. No change in technology.
8. No transport cost.
9. Perfect competition.
10. Full employment.
11. No government intervention

Factors determining exchange rates are,
(i) Differentials in Inflation
(ii) Differential in Interest rates
(iii) Current Account Deficits
(iv) Public Debt
(v) Terms of Trade
(vi) Political and Economic Stability
(vii) Recession
(viii) Speculation

FDI has the following objectives.
(i) Sales Expansion
(ii) Acquisition of resources
(iii) Diversification
(iv) Minimization of competitive risk

Also known as floating exchange rate, the exchange rates are freely determined in an open market by market forces of demand and supply.

1. Better utilization of resources.
2. Concentration in the production of goods in which it has a comparative advantage.
3. Saving in time.
4. Perfection of skills in production.
5. Improvement in the techniques of production.
6. Increased production.
7. Higher standard of living in the trading countries

(i) Private foreign capital tends to flow to the high profit areas rather than to the priority sectors.
(ii) The technologies brought in by the foreign investor may not be appropriate to the consumption needs, size of the domestic market etc.
(iii) Foreign investment, sometimes, have unfavorable effect on the Balance of Payments of a country because when the drain of foreign exchange by way of royalty, dividend, etc. is more than the investment made by the foreign concerns.
(iv) Foreign capital sometimes interferes in the national politics.
(v) Foreign investors sometimes engage in unfair and unethical trade practices.
(vi) Often, there are several costs associated with encouraging foreign investment.
(iv) Foreign investment in some cases leads to the destruction.

1. FDI is an important factor in global 
2. Foreign trade and FDI are closely related.
3. In developing countries like India FDI in tie natural resource sector like plantations, increases rade.
4. Foreign production by FDI is useful to substitute foreign trade.
5. FDI is also influenced by the income generated from the trade and regional integration schemes.
6. FDI accelerates the economic growth by facilitating essential imports needed for development programs like capital goods, technical know-how, raw materials, other inputs and even scarce consumer goods.
7. When the export earnings of a country are not sufficient to finance for imports, FDI may be required to fill the trade gap.
8. FDI is encouraged by foreign exchange shortage, desire to create employment and acceleration of the pace of economic development.
9. Many developing countries strongly prefer foreign investment to imports.