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1800 Balance of Payments
1800 Balance of Payments
Sunitha N.K
Zahabia Bhalamwala Ashmitha N.S
Indupriya S
Mandanna T.M
Shruti Srinivas
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
• Favorable Balance Of Payments – Value of
total receipts more than total payments
• Adverse Balance Of Payments – Value of
total receipts less than total payments
• Balanced Balance Of Payments – Value of
total receipts equals total payments
• Unrequited receipts – Receipts for which
nothing has to be paid in return.
• Unrequited payments – Payments for which
nothing is received in return.
Balance of Trade
Definition: Difference between value of exports
and imports of visible items only
BOT BOP
• Records only merchandise •Records transactions
transactions relating to both goods and
• Does not record transactions services
of capital nature • Records transaction of
• A part of current account of capital nature
BOP • Includes BOT , Balance of
services , Balance Of
Unrequited Transfers and
Balance Of Capital
Transactions.
BALANCE OF PAYMENT ACCOUNT
CURRENT ACCOUNT
• All transactions relating to goods,
services and unrequited transfers
constitute current account
• Flow of items pertaining to specific
period of time
• Visible items include
goods
• Invisible items include
services
Structure of current account
Transactions Credit Debit Net Balance
1. Merchandise Export Import -
2. Foreign Travel Earning Payment -
3. Transportation Earning Payment -
4. Insurance Receipt Payment -
(Premium)
5. Investment Income Dividend Receipt Dividend Payment -
6.Government Receipt Payment -
(purchase of goods &
services)
CURRENT A/C - - Surplus (+)
Balance Deficit (-)
CAPITAL ACCOUNT
• All transactions indicating changes in stock
magnitudes concerning capital receipts and
payments constitute capital account
• Relates to
- Borrowing
- Capital repayment
- Sale of assets
- Change in stock of gold
- Change in reserve of foreign currency
Short term capital movement includes:
Purchase of short term securities
Speculative purchase of foreign currency
Cash balances held by foreigners
Net balance of current account
• 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