BALANCE OF PAYMENT OF INDIA

What is BoP:
Definition :The balance of payments of a country is a systematic record of all
economic transactions between the residents of a country and the rest of the
world. It presents a classified record of all receipts on account of goods exported,
services rendered and capital received by residents and payments made by them
on account of goods imported and services received from the capital transferred
to non-residents or foreigners. - Reserve Bank of India
FEATURES:
1. The balance of payments accounts are those that record all transactions
between the residents of a country and residents of all foreign nations.
2. The BOP is determined by the countrys exports and imports of goods,
services, and financial capital, as well as financial transfers.
3. It reflects all payments and liabilities to foreigners (debits) and all payments
and obligations received from foreigners (credits)
4. . Balance of payments is one of the major indicators of a countrys status in
international trade 
COMPONENTS OF BOP:
1. CURRENT ACCOUNT:This part of the balance of payments is regarded as
the most important, as it shows a nation’s trading strength.The current
account measures a country's trade balance plus the effects of net income and
direct payments. When the activities of a country's people provide enough
income and savings to fund all their purchases, business activity, and
government infrastructure spending, then the current account is in balance. If
payments are greater than receipts, there is a deficit which is undesirable.It is
divided into two sub divisons:
A — Visible Trade:
The money earned from Indian exports of goods (e.g., cars sold to Nepal) is
credited (added) to this account, whilst payments for imported goods (e.g.,
American aircraft sold in India) are debited. The difference between the totals is
known as the Balance of Trade.
B — Invisible Trade:
The income earned from the sale of Indian services abroad is known as an
invisible export, e.g., an insurance premium paid by a British ship-owner to an
Indian broker. When Indian residents spend money on foreign services, e.g., a
week’s accommodation in London, they are creating invisible imports, because
payment is going out of India.
Current Account Balance:
The balance of trade (visible) and net invisibles are added,to give, the current
account balance. The net figure may be plus or minus. A deficit (-) on the current
account is a warning that the nation is spending more than it is earning, in the
short run.
2. CURRENT ACCOUNT DEFIET:The current account deficit is a
measurement of a country’s trade where the value of the goods and services it
imports exceeds the value of the products it exports. The current
account includes net income, such as interest and dividends, and transfers, such
as foreign aid, although these components make up only a small percentage of
the total current account. The current account represents a country’s foreign
transactions 
3. FININCIAL ACCOUNT:The financial account measures: 1) changes in
domestic ownership of foreign assets and 2) foreign ownership of domestic assets.
If foreign ownership increases more than domestic ownership does, it creates a
deficit in the financial account. This means the country is selling off its assets,
like gold, commodities, and corporate stocks, faster than it is acquiring foreign
assets.
3.CAPITAL ACCOUNT:The capital account measures financial transactions
that don't affect a country's income, production, or savings. For example, it
records international transfers of drilling rights, trademarks, and copyrights.
Many capital account transactions happen infrequently, such as cross-border
insurance payments. The capital account is the smallest component of the
balance of payments.
4.ERRORS AND OMISSION: The entries under this head relate mainly to leads
and lags in reporting of transactions 
It is of a balancing entry and is needed to offset the overstated or understated
components.
Disequilibrium In The Balance Of Payments
A disequilibrium in the balance of payment means its condition of Surplus Or
deficit 
A Surplus in the BOP occurs when Total Receipts exceeds Total Payments.
Thus, BOP= CREDIT>DEBIT 
A Deficit in the BOP occurs when Total Payments exceeds Total Receipts. Thus,
BOP= CREDIT<DEBIT
INDIA'S BALANCE OF PAYMENT 
1. A country, like India, which is on the path of development generally,
experiences a deficit balance of payments situation. 
2. This is because such a country requires imported machines, technology and
capital equipment's in order to successfully launch and carry out the programme
of industrialization.
Key Features of India’s BoP in Quater-3 of 2018-19
1. India’s current account deficit (CAD) at US$ 16.9 billion (2.5 per cent of GDP)
in Q3 of 2018-19 increased from US$ 13.7 billion (2.1 per cent of GDP) in Q3 of
2017-18, but moderated from US$ 19.1 billion (2.9 per cent of GDP) in the
preceding quarter.
2. The widening of the CAD on a year-on-year (y-o-y) basis was primarily on
account of a higher trade deficit at US$ 49.5 billion as compared with US$ 44.0
billion a year ago.

3. Net services receipts increased by 2.8 per cent on a y-o-y basis mainly on the
back of a rise in net earnings from telecommunications, computer and
information services and financial services.
4. Private transfer receipts, mainly representing remittances by Indians
employed overseas, amounted to US$ 18.7 billion, increasing by 6.3 per cent
from their level a year ago.
5. In the financial account, net foreign direct investment at US$ 7.5 billion in Q3
of 2018-19 increased from US$ 4.3 billion in Q3 of 2017-18.
6. Portfolio investment recorded net outflow of US$ 2.1 billion in Q3 of 2018-19 –
as compared with an inflow of US$ 5.3 billion in Q3 last year – on account of net
sale in the equity market.
7. Net inflow on account of external commercial borrowings increased to US$ 2.0
billion in Q3 of 2018-19 from US$ 0.3 billion a year ago.
8. In Q3 of 2018-19, there was a depletion of US$ 4.3 billion of the foreign
exchange reserves (on BoP basis) as against an accretion of US$ 9.4 billion in Q3
of 2017-18 (Table 1).

BoP during April-December 2018

1. The CAD increased to 2.6 per cent of GDP during April-December 2018 from
1.8 per cent April-December 2017 on the back of widening of the trade deficit.
2. India’s trade deficit increased to US$ 145.3 billion in April-December 2018
from US$ 118.4 billion in April-December 2017.
3. Net invisible receipts were higher in April-December 2018 mainly due to
increase in net services earnings and private transfer receipts.
4. Net FDI inflows in April-December 2018 increased to US$ 24.8 billion from
US$ 23.9 billion in April-December 2017.
5. Portfolio investment recorded a net outflow of US$ 11.9 billion in April-
December 2018 as against an inflow of US$ 19.8 billion a year ago.
6. In April-December 2018, there was a depletion of US$ 17.5 billion of the
foreign exchange reserves (on a BoP basis).