You are on page 1of 11

BALANCE OF PAYMENTS

Project by:- Sagar . S . Savla Roll No:- 605 S.Y.Bms Subject:- MANAGERIAL ECONOMICS-2

BALANCE OF PAYMENTS
DEFINE:- According to KINDLE BERGER,
"The balance of payments of a country is a systematic record of all economic transactions between the residents of the reporting country and residents of foreign countries during a given period of time". The balance of payment record is maintained in a standard double-entry book-keeping method. Balance of Payment is a record pertaining to a period of time; usually it is all annual statement.

Current Account
It is difference between the receipts and payments on account of current account. The current account includes export of services, interests, profits, dividends and unilateral receipts from abroad. There can be either surplus or deficit in current account.

Capital Account
It is difference between the receipts and payments on account of capital account. The capital account involves inflows and outflows relating to investments, short term borrowings/lending, and medium term to long term borrowing/lending. There can be surplus or deficit in capital account.

Structure of Balance of Payment (BOP)

Balance of Payments and Balance of Trade


Balance of trade refers to the export and import of visible items, i.e., material goods. Invisible items are those items which are not recorded in the customs returns. If the value of visible exports is greater than that of visible imports, the balance of trade is favourable.

Types of disequilibrium in the balance of payments


1. Structural Disequilibrium 2. Cyclical Disequilibrium 3. Technological Disequilibrium 4. Short run Disequilibrium 5. Long run or Secular Disequilibrium 6. Monetary Disequilibrium

Causes of Disequilibrium in Balance of Payment


1. Population Growth 2. Development Programmes 3. Demonstration Effect 4. Natural Factors 5. Cyclical Fluctuations 6. Inflation 7. Poor Marketing Strategies 8. Flight Of Capital

Monetary Measures for Correcting the BoP


1. Deflation 2. Exchange Depreciation 3. Devaluation 4. Exchange Control

Non-Monetary Measures for Correcting the BoP


1. Tariffs 2. Quotas Types of Quotas :a) b) c) d) e) the tariff or custom quota, the unilateral quota, the bilateral quota, the mixing quota, and import licensing.

3. Export Promotion

You might also like