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Balance of Payment Meaning and Components

The document discusses the meaning and components of balance of payments, which is a record of economic transactions between a country and the rest of the world. It has two main accounts - the current account covering trade in goods and services, income, and transfers, and the capital account covering capital transactions and official reserves. Common causes of deficits and measures to correct disequilibrium are also covered.

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Manauwar Hussain
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12 views

Balance of Payment Meaning and Components

The document discusses the meaning and components of balance of payments, which is a record of economic transactions between a country and the rest of the world. It has two main accounts - the current account covering trade in goods and services, income, and transfers, and the capital account covering capital transactions and official reserves. Common causes of deficits and measures to correct disequilibrium are also covered.

Uploaded by

Manauwar Hussain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Balance of

Payment
What to Study?????

– 1. Meaning
– 2. Current Account and Capital Account
– 3. Causes of deficit in Balance of Payment in India
– 4. Measures to correct disequilibrium in the Balance of Payment
Meaning

– Balance of Payment is a systematic record of all the economic transactions


between residents (all the units) of a country and the rest of the world in an
accounting year.
– It is a statement of systematic record of all economic transactions between one
country and rest of the world.
– It adopts a double entry book keeping system with two sides debit and credit.
Payments are recorded on the debit side and receipts on the credit side.
There are 2 main accounts in the BOP –

1. Current account-
2. Capital account-
Current Account

– Balance of Payments of a current account is a statement of actual receipts and


payments relating to export and import of goods and services and unilateral
transfers during a given period of time.
– Components of Current Account
– Export and Import of visible items. (Goods)
– Export and Import of invisible items. (Services)
– Income receipts and payments from and to abroad.
– Unilateral transfers
Capital Account

– It records capital transactions such as loans and investments between one


country and the rest of the world, which causes a change in the assets and
liabilities status of the residents of a country or its government.
– Components of Capital Account
– Foreign Investment
– Borrowings
– Official international reserve
Balance of Payment (BOP)

Current Account Capital Account

Visible Items Invisible Items Investment Official


FDI, Portfolio Investment International
Trade in Goods Reserve
Borrowings
and lending
Trade in Services Unilateral transfers to and from
(Donations, Gifts., etc) abroad

Factor Services Non Factor Services


(Dividends, (Shipping, Banking,
Interest, Profit insurance etc
Balance of Trade

– Export> Import- BOT favourable


– Export< Import-Unfavourable

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