Balance of Payment and Indian Economy
INTERNATIONAL FINANCE
TOPIC: “BALANCE OF PAYMENT AND INDIAN ECONOMY
INTRODUCTION
BALANCE OF PAYMENT According to Reserve Bank of India, the balance of payments of a country is a systematic record of all economic transactions between the residents of a country and the rest of the world. It presents a classified record of all receipts on account of goods exported, services rendered and capital received by residents and payments made by them on account of goods imported and services received and capital transferred to non-residents or foreigners According to IMF Balance of payment manual, the balance of payments is a statistical statement for a given period which shows:
Transactions in goods and services and income between economy and the rest of the world.
Changes in ownership and other changes in that country’s monetary gold, special Drawing Rights, and claims on and liabilities to the rest of the world, and
Unrequited transfers and counterpart entries that are need to balance, in the accounting sense, any entries in the foregoing transactions and changes which are not mutually offsetting. Balance of payment (BoP) comprises of current account, capital account, errors and omissions and changes in foreign exchange reserves. Under current account of the BoP, transactions are classified into merchandise (exports and imports) and invisibles. Invisible transactions are further classified into three categories, namely (a) Services-travel, transportation, insurance, Government not included elsewhere (GNIE) and miscellaneous (such as, communication, construction, financial, software, news agency, royalties, management and business services); (b) Income; and (c) Transfers (grants, gifts, remittances, etc.) which do not have any quid pro quo. Under the Capital Account, capital inflows can be classified by instrument (debt or equity) and maturity (short or long term). The main components of the capital account
TOPIC: “BALANCE OF PAYMENT AND INDIAN ECONOMY
INTRODUCTION
BALANCE OF PAYMENT According to Reserve Bank of India, the balance of payments of a country is a systematic record of all economic transactions between the residents of a country and the rest of the world. It presents a classified record of all receipts on account of goods exported, services rendered and capital received by residents and payments made by them on account of goods imported and services received and capital transferred to non-residents or foreigners According to IMF Balance of payment manual, the balance of payments is a statistical statement for a given period which shows:
Transactions in goods and services and income between economy and the rest of the world.
Changes in ownership and other changes in that country’s monetary gold, special Drawing Rights, and claims on and liabilities to the rest of the world, and
Unrequited transfers and counterpart entries that are need to balance, in the accounting sense, any entries in the foregoing transactions and changes which are not mutually offsetting. Balance of payment (BoP) comprises of current account, capital account, errors and omissions and changes in foreign exchange reserves. Under current account of the BoP, transactions are classified into merchandise (exports and imports) and invisibles. Invisible transactions are further classified into three categories, namely (a) Services-travel, transportation, insurance, Government not included elsewhere (GNIE) and miscellaneous (such as, communication, construction, financial, software, news agency, royalties, management and business services); (b) Income; and (c) Transfers (grants, gifts, remittances, etc.) which do not have any quid pro quo. Under the Capital Account, capital inflows can be classified by instrument (debt or equity) and maturity (short or long term). The main components of the capital account