Presented By:

Pooja Mohan Ajinkya Keni Girish patil

The balance of payment is defined as a systematic record of all economic transactions between the residents of a country and residents of a foreign countries It is presented in the form of double-entry bookkeeping.

BOP

Current Account

Capital Account

Reserves Gold Reserves Forex Reserves IMF Loans

Trade Transfer / factor Payments Invisibles

FDI/FIIs Portfolio Investments NRE/NRI A/cs

Capital Account:That part of balance of payments that reflects net change in national ownership of assets. Capital Account = Foreign direct investment +Portfolio investment +Other investment

INDIA'S OVERALL BALANCE OF PAYMENTS

Item/Year 1 Credit 2 256159 190488 124636 15793 14246 1945 535 92117 53100 24050 2010-11 Debit 3 383481 111218 80555 11026 13880 1400 820 53430 2194 27694 2011-12 Debit 6 499533 107625 78227 13762 16382 1497 780 45806 1256 26788 (US $ million) 2012-13 Debit Net 9 10 502237 -195656 116551 107493 80763 64915 11823 14806 1409 813 51912 2363 30349 6176 2528 818 -239 55632 63504 -1902

Net 4 -127322 79269 44081 4768 366 545 -285 38687 50905 -3644

Credit 5 309774 219229 142325 18462 18241 2632 478 102513 62212 25910

Net 7 -189759 111604 64098 4699 1859 1134 -302 56707 60957 -878

Credit 8 306581 224044 145678 17999 17334 2227 574 107544 65867 28447

A. Current Account
1. Merchandise 2. Invisibles (a+b+c) a) Services i) Travel ii)Transportation iii) Insurance iv) G.n.i.e. v) Miscellaneous of which : Software services Business services

Financial services
Communication services b) Transfers i) Official ii) Private c) Income i) Investment income

6508
1562 56265 647 55618 9587 8471

7483
1152 3125 631 2494 27538 25546

-975
410 53140 16 53125 -17952 -17075

5967
1600 66761 632 66129 10144 7676

7984
1557 3267 607 2660 26131 24141

-2018
43 63494 25 63469 -15988 -16465

4949
1686 68090 463 67627 10276 7202

4633
741 4057 772 3285 31731 29572

316
945 64034 -309 64342 -21455 -22370

ii) Compensation of employees

1116
446647

1992
494700

-876
-48053

2468
529003

1991
607158

477
-78155

3074
530625

2159
618788

914
-8816

Total Current account (1+2)

The BOP provides an extremely useful data for the economic analysis of the countrys weakness and strength as a partner in international trade. BOP also reveals the changes in the composition and magnitude of foreign trade. BOP also provides indications, future repercussions of countries past trade performances.

Total receipts and total payments inequality shows disequilibrium of balance of payments account

B=RP Where, B stands for balance of payments, R denotes receipts from foreigners, P stands for payments made to foreigners A country whose balance of payments is positive is called as surplus country (R>P) A country whose balance of payments is negative is called as deficit country (P>R)

Cyclical disequilibrium: It occurs on account of trade

cycles. Cyclical fluctuations in demand are caused by changes in Income, employment, output & price.

Structural disequilibrium: It is caused because of

fluctuation in the demand based on changes in tastes, fashions, habits, income, economic progress etc.

Short run disequilibrium: When a country borrows

or lends internationally, it will have short run disequilibrium, as these are usually for short period.

Long run disequilibrium: It occurs because of

accumulation of deficits or surpluses over a long period.

Causes for Indias BOP deficit

Huge development & investment programs : Due to huge development and investment programs , Import goes on increasing , requirement of capital for rapid industrialization, while exports may not be boosted up to that extent. Thus, there will be structural changes in the balance of payments and structural equilibrium will result.

Population growth: High population growth in poor countries has adverse impact on their balance of payments. Increase in the population increases the needs of these countries for imports and decreases the capacity of export. Huge external borrowing: A country will have adverse balance of payments when it borrows heavily from another country Inflation: Rapid economic development, increase in the income & price will adversely affect BOP position of a developing country like India.

THANK YOU