BALANCE OF

PAYMENTS
GR OUP 9

ANANYA J AI MI NI
I NAKSHI PANDI T
KUNAL SI NHA
SAMRDDHI MI TTAL
SUYASH GUPTA
GOUTHAM VALE
 INTRODUCTION
BALANCE OF PAYMENTS (BOP) OR BALANCE OF INTERNATIONAL
PAYMENTS IS THE SYSTEMATIC AND SUMMARY RECORD OF A
COUNTRY' S ECONOMIC AND FINANCIAL TRANSACTIONS WITH THE
REST OF THE WORLD OVER A PERIOD OF TIME

IT INCLUDES ALL TRANSACTIONS- VISIBLE AS WELL AS INVISIBLE

IT RELATES TO A PERIOD OF TIME, GENERALLY, IT IS AN ANNUAL

STATEMENT

IT ADOPTS A DOUBLE-ENTRY BOOKKEEPING SYSTEM, THAT IS, IT HAS

A CREDIT AND DEBIT SIDE

RECEIPTS ARE RECORDED ON THE CREDIT SIDE AND PAYMENTS ARE

ON THE DEBIT SIDE
BALANCE OF TRADE
T hi s i s t he di f f e r e n ce b e t w e e n the i mp o rts a n d e xp o r t o f v i si b l e i t e ms.

Vi s i bl e I t ems - I n clud e s a ll typ e s o f p hysi ca l go o ds e x p o r t e d a nd

i mp or t ed.

I n v i s i b l e I t ems - I n clud e s a ll tho se se rv i ce s who se e x p o r t s a nd i mp o r t a r e

n ot v i s i bl e i e se r v i ce s

Whe n expor t s a r e mo r e t h a n i mp o rts B O T i s f avour ab le a n d i f i mpor t s a r e

mor e t ha n exp o r t s t he n i t i s unf avour ab le .
 BOT AND BOP
It is a narrower term I t i s a boa der t e r m

It includes only visible items I t i ncl udes a ll t r a n s a ct i o ns re la te d to

v i s i bl e , i nv i si b le & ca p i t a l tra n sf e rs

It can be favourable or I t a l wa ys ba la n ce s i t se l f
unfavourable

BOT= Net Earnings on Exports BOP =Cur r ent A/ c + C a p i t a l A/ c + / -

less Net Payments on Imports Er r or s or Omi ssi o n s

Following factors affect BOT F ol l owi ng f a c t o r s a f f e ct BO P

Cost of production Con di t i on of f o r e i g n le n d ers
Availibility of raw materials Eco nomi c po l i cy o f G o v t
Exchange Rate F a ct or s f or B O T
Prices of goods manufactured
in home country
 IMPORTANCE OF
BALANCE OF
PAYMENT
IT RECORDS ALL TRANSACTIONS THAT CREATE
DEMAND AND SUPPLY OF A CURRENCY
IT HELPS TO JUDGE THE ECONOMIC AND
FINANCIAL STATUS OF A COUNTRY IN THE SHORT
TERM
IT MAY CONFIRM TRENDS IN THE ECONOMY' S
INTERNATIONAL TRADE AND EXCHANGE RATE AND
HELP TO IDENTIFY CHANGES OR REVERSALS IN
TRENDS AS WELL
 Components of
BOP
CUR RENT ACCO U N T CAPI TAL ACCO U N T
CHANGES I N F O R EX R ESE RV E S ERR ORS AN D O MI S S I O N S
CURRENT ACCOUNT
IT RECORDS TRANSACTIONS RELATING TO THE EXPORT AND IMPORT OF
GOODS, SERVICES, UNILATERAL TRANSFERS AND INTERNATIONAL INCOMES

BOP ON CURRENT ACCOUNT INCLUDES THREE BALANCES, NAMELY:

MERCHANDISE, SERVICES, AND UNILATERAL TRANSFERS

TRADE BALANCE INCLUDES MERCHANDISE (EXPORT-IMPORT OF GOODS)

AND SERVICES (EXPORT-IMPORT OF SERVICES)

INCOME BALANCES INCLUDE NET INVESTMENT INCOME, THAT IS, NET

INCOME RECEIPTS FROM ASSETS AND NET INTERNATIONAL COMPENSATION
TO EMPLOYEES

NET UNILATERAL TRANSFERS INCLUDES GIFTS TO AND FROM FOREIGN

COUNTRIES

THERE CAN BE EITHER SURPLUS OR DEFICIT IN CURRENT ACCOUNT

CAPITAL ACCOUNT
IT RECORDS ALL INTERNATIONAL TRANSACTIONS THAT
INVOLVE A RESIDENT OF THE COUNTRY CHANGING HIS
ASSETS OR LIABILITIES WITH A RESIDENT OF ANOTHER
COUNTRY

IT INVOLVES INFLOWS AND OUTFLOWS RELATING TO

INVESTMENTS, BORROWINGS AND LENDING OF SHORT,
MEDIUM AND LONG TERM

IT CAN BE CLASSIFIED INTO TWO CATEGORIES, NAMELY:

NON-DEBT LIABILITIES (FOREIGN DIRECT INVESTMENT AND
PORTFOLIO INVESTMENTS) AND DEBT LIABILITIES (LOANS AND
BANKING CAPITAL INCLUDING NRI DEPOSITS
ERRORS AND OMISSIONS
ENTRIES UNDER THIS HEAD RELATE MAINLY TO LEADS AND LAGS IN
REPORTING TRANSACTIONS

IT IS A BALANCING ENTRY AND IS NEEDED TO OFFSET THE OVERSTATED OR

UNDERSTATED COMPONENTS

FOREX RESERVES
IT INCLUDES THREE ACCOUNTS, NAMELY: IMF, SDR, AND FOREX RESERVES
AND MONETARY GOLD

IMF ACCOUNT CONTAINS PURCHASES AND REPURCHASES FROM

INTERNATIONAL MONETORY FUND

SPECIAL DRAWING RIGHTS ARE RESERVE ASSETS CREATED BY IMF, USED

TO SETTLE INTERNATIONAL PAYMENT BETWEEN TWO COUNTRIES
 DISEQUILIBRIUM IN BOP
Causes of Disequilibrium
1 CYCLI CAL FL U CT U AT I O N S
What is it?
2 SHORTFALL S I N EXPO R T
I T CAN BE SURPL US, T HAT I S,
3 ECONOMI C D EVEL O PME N T TOT AL RECE I P TS EXC EED T O T AL
PAY MENTS ( C REDI T> DEB I T )
4 RAPI D I NCR EAS ES I N POP U L A TIO N
I T CAN BE DE F I C I T, T HAT I S,
5 STR UCTURAL CH AN GES
TOT AL PAYMENTS EXC EE D
6 NATURAL CAL AMI T I ES TOT AL RECE I P TS
( DEBI T >CRED I T)
7 I NTERNATI O N AL CAPI TA L MO V E ME N T
 MEASURES TO CORRECT DISQEUILIBRIUM

MONETARY MEASURES NON-MONETARY MEASURES

Monetary Policy
Fiscal Policy
Exchange Rate Depreciation Export Promotion
Devaluation Import Substitutes
Deflation Import Control through Quotas and
Exchange Control Tariffs
INDIA'S BOP STATEMENT FOR
Q1:2022-23