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Su ni tha N. K
Za ha bia Ashmi tha N. S
Bhal am wala In du priy a S
Mand ann a T. M
Sh ruti Sr in ivas
Group 11
Agenda
• DEFINITION
• PURPOSE OF BOP
• BALANCE OF PAYMENT ACCOUNTS
• TYPES OF ACCOUNTS
• STRUCTURE OF BOP ACCOUNT
• BALANCE OF TRADE
• EQUILIBRIUM
• DISEQUILIBRIUM
• CORRECTIVE MEASURES
• BOP ADJUSTMENTS
• INDIA’S PAST & CURRENT BOP SCENARIO
Definition
A Balance of Payment account is a statement
of double entry system of record of all
economic transactions (involving foreign
payments) between residents of a country
and the rest of the world carried out in
specific period of time.
Purpose Of BOP
• Provides data for economic analysis
• Reveals changes in the composition &
magnitude of foreign trade
• Provides indications of future
repercussions of country’s past trade
performances
• Reveals the weak and strong points of a
country’s foreign trade relations
TERMINOLOGIES
• Favo rable Bal ance O f Pay ment s – Value
of total receipts more than total payments
BOT BOP
Cur re nt A/ c: Cur re nt A/ c:
•Exports of goods(Visible items) •Imports of goods(Visible items)
•Exports of services •Imports of services(Invisibles)
(Invisibles) •Unrequited payments( gifts,
•Unrequited receipts(gifts , remittance, indemnities etc. to
remittances, indemnities, foreigners)
etc. form foreigners) Cap it al A/ c:
Cap it al A/ c: •Capital payments (lending to ,
•Capital receipts (Borrowings capital repayments to , or
from abroad , capital repayments purchase of assets from
by , or sale of assets to foreigners, reduction in stock
foreigners, increase in stock of of gold and reserves of foreign
gold and reserves of foreign currency etc.)
currencyTotal
etc.)
Receipts Total Payments
An Example
Let us consider the following hypothetical
situation:
• Export of goods Rs. 550 Crore
• Import of goods Rs. 650 Crore
• Export of services Rs. 150 Crore
• Import of services Rs. 70 Crore
• Unrequited receipts Rs. 100 Crore
• Unrequited payments Rs. 80 Crore
• Capital receipts Rs. 200 Crore
• Capital payments Rs. 200 Crore.
Balance Of Payment
Account
Credits Debits
• Current A/c: • Current A/c:
2) Export of goods 550 2) Import of goods 650
3) Export of services 150 3) Import of services 70
4) Unrequited receipts 100 4) Unrequited payments 80
To ta l r ec eip ts To ta l p ay men ts
10 00 10 00
EQUILIBRIUM IN BOP
ACCOUNTS
Total receipts equals total payments arising
out of transfer of
– Goods and services
– Other transactions
These transactions are classified as:-
– Autonomous transactions
– Induced transactions or Accommodating
capital flows
• In the curr ent account autonomous
transactions are the export and import of
goods and services
• Cyclical Disequilibrium
• Structural Disequilibrium
CAUSES OF
DISEQUILIBRIUM
• Increase in imports
• International developments
• INDIRECT MEASURES
Income measures
Fiscal Policy
Monetary Policy
Price measures
• DIRECT MEASURE
Exchange control
Variations in India’s
deficit position