c




 V




R Farhan Choudhary 12
R Iram Dabir 13
R Saba Dabir 14
R Salman Malkani 26
R Humaid Nathekar 29
R Sonali Shinde 53
 V


R Introduction
R Definition
R Characteristics
R Structure of Balance of Payments
R Equilibrium and Disequilibrium in BOP.
R Monetary measures
R Non-monetary measures
R Conclusion
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R ›he Balance of payment is defined as,

´a systematic record of all

economic transactions
between the residents of a
country & residents of a
foreign countries during a
certain period of time.µ
 Characteristics
R In policy formulation
R ›o study the strengths & weaknesses
R In knowing position of the country
R Identifying threats & opportunities
R Converting weaknesses into threats
R Changes in the composition & direction of
foreign trade
 à  
V
›he balance of payments is usually composed
of two sections:
(1) Current account:
R It consists of real economic transactions undertaken on
international trade account.

(a) Merchandise or trade account:

R ›he trade account consists of exports & imports of
goods.
R It refers to only the difference between the value and of
imports & exports.
R ›rade account covers total debits & credits of all Visible
items.

(b) Invisible account:
R It comprises the services account & the gift or
charities account.

R Services account records all the services

rendered & received by residents of the nation.

R ›rade account covers total debits & credits of

all invisible items.
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‘ccording to the international monetary fund, the
following transactions have been accepted as invisible
transaction :
R ›ravel for may reasons.
R Premiums and claims.
R Investments.
R Miscellaneous services.
R Donations, Migrant remittances and legacies.
R Repayment of commercial credits.
R Contractual amortization.
  
R Capital account deals with payments of debts and
claims.

R It consists of all such items as may be employed in

financing both imports and exports.

R Balances in the accounts may rise or fall from year to

year.

R It is categories in short term and long term capital

movement both in and out of the country.
 
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1. Merchandise ² Exports and Imports : 1. Private (non-banking) loans:
(a) Private (a) Long-term
(b) Government (b) Short-term
2. Non-monetary gold movement 2. Banking (excluding central bank)
3. Foreign travel 3. Official (including central bank)
4. ›ransportation (a) Loans
5. Government, not included (b) ‘mortization
6. Government, not included elsewhere (c) Miscellaneous
7. Investment income (d) Reserves (Including charges in
8. Miscellaneous the foreign exchange assets of
9. ›ransfer payments the central bank)
(a) Official
(b) Private

›otal Current ›ransactions ›otal Capital and Monetary Gold

Errors and Omissions
 Equilibrium in BOP
R Equilibrium in balance of payment means the
accounts must always be balance.
R Credit in the credit account is extended to the
extent of the debit in the current account.
R symbolically B = R ² P.
where,
R B = Balance of payment.
R R = Receipts.
R P = Payments.
 Disequilibrium of BOP
R ›he deficit in the balance of payment is regarded
as Disequilibrium of BOP

›ypes of Disequilibrium
1. Cyclical Disequilibrium.
2. Structural Disequilibrium.
3. Short run Disequilibrium.
4. Long run Disequilibrium.
 Monetary measures
R Monetary measures are important for balancing
the balance of payment.
R ›he following measures can be used to correct
deficits in the countries balance of payment:

1)Deflation
2)Exchange Depreciation
3)Devaluation
 Non-monetary measures
R Non-monetary measures are also needs for
balancing the balance of payment.
R ›he following measures can be used to correct
deficits in the countries balance of payment:

1. ›ariff
2. Import Quotas
3. Exports promotion
4. Import substitution
 Conclusion
R It should be noted that, the surplus in the trade or
current account must be equal to the deficit in the capital
account or the deficit in the current account.

R ›he non-monetary measures are considered more

effective in correcting a deficit in the balance of payment.

R Balance of payments is a complete picture of the

country·s international relations.