2. What is Balance of Payments?
• Method countries use to monitor all international monetary
transactions at a specific period of time.
• These transactions are made by individuals, firms and government
bodies, payments for the counties export and import of goods,
services, financial data and financial transfer.
• Also known as balance of international payments.
• Calculated every quarter and every calendar year.
• Theoretically, the BOP should be zero, which means that asset and
liabilities should be equal.
• Includes two types of account, excluding central reserve bank
account. such as:
1- Current account
2- Capital account
3. CURRENT ACCOUNT
• one of two primary components of the balance of payments.
• Consist of balance of trade, net primary income or factor
income (earnings on foreign investments minus payments made to
foreign investors) and net cash transfers, that have taken place over a
given period of time.
• The current account reflects the net change in ownership of national
• Major account of a country for a foreign trade.
• A current account surplus indicates that country’s asset has been
grew over the period.
• A current account deficit indicates that country’s liabilities has been
grew over the period.
• Both government and private companies are included in these trade
4. CAPITAL ACCOUNT
• one of two primary components of the balance
• Also known as financial accounts.
• A surplus of capital account indicates that money
flowing into the country.
• A deficit of capital account indicates that money
flowing out of the country.
• Financial accounts term is used in bulk amount of
• It includes:
1. FDI- long term capital investment
5. 2- portfolio investment-refers to shares and bonds
3-other investment- capital flows into bank account and
provided as loan.
4-reserve account- operated by nation’s central bank to
buy and sell foreign currencies.
• The objective of balance of payments is to keep track of
spending and savings to determine your financial goals.
• This system is a macroeconomic goal.
7. • The trade deficits during these four plans were so
heavy that it could not be offset by the flow of funds
under net invisibles. The following table depicts a
clear picture about the amount of deficits in the
balance of payments from the First Plan to the Ninth
• This huge deficit in the balance of payments position
during the entire Sixth, Seventh and Eighth and
Ninth Plan periods was the result of tremendous rate
of growth of imports accompanied by a poor rate of
growth of exports.
9. PRESENT INDIA’S BALANCE OF PAYMENTS
• The account of India's monetary transactions with the rest of the world turned to
a deficit of $0.9 billion in July-September from surplus of $11.4 billion in April-
June, central bank data showed on Tuesday. It hit a record surplus of $30.1 billion
between January and March.
• India’s trade deficit narrowed to US$ 144.2 billion in 2014-15 from US$ 147.6
billion in 2013-14. With modest increase in invisibles supported by some
improvement in net services receipts, the CAD tracked the trade deficit and
shrank to US$ 27.5 billion in 2014-15 (1.3 per cent of GDP) from US$ 32.4 billion
(1.7 per cent of GDP) a year ago.
10. • Net inflows under the capital and financial account (excluding change
in foreign exchange reserves) rose to US$ 89.5 billion during 2014-15
from US$ 48.7 billion in the previous year.
• There was an accretion to India’s foreign exchange reserves to the
tune of US$ 61.4 billion in 2014-15 as compared with US$ 15.5 billion
• At the end of March 2015, the level of foreign exchange reserves
stood at US$ 341.6 billion.
• INDIA’S external debt is up by 6.6% in March 2015.
• Long-term debt forms the large part of the debt at 82.2%, while
India's short-term debt exposure, which was 20.5% in March 2014,
came down to 17.8% of the total external debt.
• India's external debt increased by $29.5 billion (approximately Rs 1.9
lakh crore) to stand at $475.8 billion (approximately Rs 31.4 lakh
crore) at the end of March 2015, a 6.6% increase over the last year's
debt of $446.3 billion (approximately Rs 29.4 lakh crore), according to
a report by the department of Economic Affairs.