BALANCE OF PAYMENT:

Click to edit Master subtitle style (STATUS OF BALANCE OF PAYMENT IN INDIA)

BY S.SATHUSHRA
4/21/12

SYNOPISIS:

Introduction. definition. of balance of payment.

Standard

Components

Current account Capital account Unilateral account Official settlement account

The

structure of balance of payment accounts in India.

Trade balance Current account
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MEANING:

A balance of payments (BOP) sheet is an accounting record of all monetary transactions between a country and the rest of the world. These transactions include payments for the country's exports and imports of goods, services and financial capital, as well as financial transactions .The BOP summarises international 4/21/12

 Surplus

items in BOP:

Sources of funds for a nation; Exports or the receipts of loans and investments are recorded as positive.

Deficit items in BOP; Uses of funds:

Imports or to invest in 4/21/12 foreign countries are

COMPONENTS OF BALANCE OF PAYMENTS:

i) Current Account ii) Capital Account iii) Unilateral Payments Account iv) Official Settlement Account.

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(I) CURRENT ACCOUNT:

The Current Account includes

all transactions which give rise to or use up national income. The Current Account consists of two major items, namely: i) Merchandise exports and imports, and ii) Invisible exports and imports
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Merchandise exports and imports

Merchandise exports, i.e., the sale of goods abroad, are credit entries because all transactions giving rise to monetary claims on foreigners represent credits. Merchandise imports , i.e., purchase of goods from abroad, are debit entries because4/21/12transactions giving all

Invisible exports and imports:

Invisible Invisible

exports, i.e., sales of services, are credit entries imports, i.e. purchases of services, are debit entries.
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ii) Capital accounts

The

Capital Account consists of short- terms and long-term capital transactions A capital outflow represents a debit and a capital inflow represents a credit. 1. Foreign investment (FDI,

FII) 2. Banking capital (NRI 4/21/12 deposits)

(III) Unilateral Transfers Account

Unilateral transfers is another terms for gifts. These unilateral transfers include private remittances, government grants ,disaster relief, etc. Unilateral payments received from abroad are credits and those made abroad are debits.
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(IV) Official Settlements Accounts:

Official reserves represent the holdings by the government or official agencies of the means of payment that are generally accepted for the settlement of international claims.
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THE STURUCTURE OF BALANCE OF PAYMENT ACCOUNTS IN INDIA:

I) Trade balance II)Current account III)Capital account IV)Accounting of financing

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(i)Trade balance or balance of trade:

This

account includes the imports and exports of visible items during a given period.

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(iv) Accounting of financing:

The

surplus or deficit on account of current account, capital account and errors or omissions is financed or bridged up through external assistance (loans), gross drawing from the IMF, allocation of SDRs and increase or decline in 4/21/12 reserves.

BALANCE OF PAYMENTS ACCOUNTS OF INDIA:

6. Capital account 1. Imports a) Net foreign 2. Exports investments 3. b) Net external Trade balance (2-1) assistance (loans)
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INDIAS BALANCE OF PAYMENT POSITION:

Through

war time surplus in Indias BOP helped at the initial stages after independence. mainly due to the import of food grains and raw materials after partition of the country. devaluation of the rupee 4/21/12

Deficits

The

FIRST PLAN
The

balance of payments met with a marginal deficit of 42.3 crores. In this period, the net inflow of foreign capital was only 13.6 crores and foreign exchange reserves were about Rs.127 crores.

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SECOND PLAN
The

deficit at the end of the second plan reached Rs 1725 crores.

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THIRD PLAN
BOP

deficits on current account reached a staggering figure of Rs 1941 crores which was financed by loans from foreign countries under various schemes.

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ANNUAL PLAN
The

extents of deficits were Rs 1044.8 crores in 1966-67, Rs 948.3 crores in 1967-68 and Rs 507.7 crores in 196869.

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FOURTH PLAN
The

fourth plan ended with a nominal surplus of Rs 100 crores in BOP.

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FIFTH PLAN
The

balance of payments surplus at the end of the fifth plan was Rs 3082 cores. For the first time, since the starting of plan in India, the economy was able to record a very comfortable BOP position with such huge surplus.
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SIXH PLAN
The

euphoria of surplus attained in the previous plan had totally vanished and there was complete change in the BOP position in sixth plan. There was tremendous growth of imports during the sixth plan period and the growth of exports dwindled 4/21/12 phenomenally, and the net

SEVENTH PLAN
The

trade deficit reached the level of Rs 54,204 crores. With net invisibles of Rs 13,157 crores, the BOP exhibited a deficit of Rs 41,047 crores.

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ANNUAL PLANS PERIOD(1990-91 and 1991-92)

The

net invisible became negative in the year 1990-91 to the extent of Rs 435 crores, though it showed a surplus during 1991-92 to the extent of Rs 4258 crores.

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EIGTH PLAN
The

BOP deficit on current account remained at Rs62, 914 crores.

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NINTH PLAN period, (1997-2002)

During

the NINTH PLAN period, (1997-2002) the total trade deficit reached Rs316,445 crores and this was neutralised by surplus net invisible to the extent of Rs 253,730 crores, leaving a BOP deficit of Rs 62715 crores. This figure is 4/21/12 somewhat less than

TENTH FIVER YEAR PLAN:

Defict Public

BOP..

sector performance is negative. sector performance is positive.

Private

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REMEDIAL MEASURES:
Stepping

up exports by reducing the cost of production and exploring diversified markets. This is called export promotion. Stepping down imports by substituting indigenous materials for imported materials. This is called import substitution. exchange control policy to 4/21/12 restrict imports and to

Suitable

 THANK

YOU HAVE A NICE

DAY ..

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