BALANCE OF PAYMENTS
Balance of Payments
MEANING :
Balance of payment can be defined as systematic record of all economic transactions between the residence of one country and the residence of another country during a given period of time.Economic transactions can broadly be categorized in to four heads which are:
1. VISIBLE ITEMS : visible items include all those tangible goods which can be imported and exported. These are visible as they are made up of some matter or material. this is known as merchandise also.
2. INVISIBLE ITEMS: invisible items include all types of services like shipping,banking,tourist etc.
3. UNILATERAL TRANSFERS: These are those payments which are made without expecting anything in return of it like donations ,gifts etc.
4. CAPITAL TRANSFERS: Capital transfers are concerned with capital receipts and capital payments. It includes the transfer of assets.
COMPONENTS OF BALANCE OF PAYMENT:
1. CURRENT ACCOUNT: current account deals with the movement of exports and imports of goods and services. Merchandise may be private or government .It is the major item of the current account. Items of current account are as under:
A Exports and imports of visible items i.e. goods. It is also known as balance of trade.
B invisible items
C services
D unilateral transfers
E miscellaneous- commission, advertisement, royalties, patent fee etc.
Each one of these items has credit and debit depending on the principle of double entry book keeping.
2. CAPITAL ACCOUNT: deals with financial transactions between one country and rest of the world. These financial or capital transactions can be private ,government or institutional. It can be classified as short term and long term capital movements. These capital movements are of two types:
1. Autonomous capital : refers to those capital flows which take place because of economic considerations such as earning of interest income, dividends and other income by foreign investment etc. e.g. if MNCs are making
MEANING :
Balance of payment can be defined as systematic record of all economic transactions between the residence of one country and the residence of another country during a given period of time.Economic transactions can broadly be categorized in to four heads which are:
1. VISIBLE ITEMS : visible items include all those tangible goods which can be imported and exported. These are visible as they are made up of some matter or material. this is known as merchandise also.
2. INVISIBLE ITEMS: invisible items include all types of services like shipping,banking,tourist etc.
3. UNILATERAL TRANSFERS: These are those payments which are made without expecting anything in return of it like donations ,gifts etc.
4. CAPITAL TRANSFERS: Capital transfers are concerned with capital receipts and capital payments. It includes the transfer of assets.
COMPONENTS OF BALANCE OF PAYMENT:
1. CURRENT ACCOUNT: current account deals with the movement of exports and imports of goods and services. Merchandise may be private or government .It is the major item of the current account. Items of current account are as under:
A Exports and imports of visible items i.e. goods. It is also known as balance of trade.
B invisible items
C services
D unilateral transfers
E miscellaneous- commission, advertisement, royalties, patent fee etc.
Each one of these items has credit and debit depending on the principle of double entry book keeping.
2. CAPITAL ACCOUNT: deals with financial transactions between one country and rest of the world. These financial or capital transactions can be private ,government or institutional. It can be classified as short term and long term capital movements. These capital movements are of two types:
1. Autonomous capital : refers to those capital flows which take place because of economic considerations such as earning of interest income, dividends and other income by foreign investment etc. e.g. if MNCs are making