Balance Of Payment ( Bo P)

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Balance Of Payment ( Bo P)

  1. 1. Balance of Payment (BoP) Presented by Parvathy.M.U
  2. 2. Definition <ul><li>“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 from the capital transferred to ‘non-residents’ or ‘foreigners’.” – Reserve Bank of India (RBI) </li></ul>
  3. 3. Importance of BoP <ul><li>The BoP is an important indicator of pressure on a country’s foreign exchange rate . </li></ul><ul><li>The BOP helps to forecast a country’s market potential, especially in the short run. </li></ul><ul><li>Changes in a country’s BOP may signal the imposition or removal of controls over payment of dividends and interest, license fees, royalty fees, or other cash disbursements to foreign firms or investors. </li></ul>
  4. 4. Contents of BoP <ul><li>Current account </li></ul><ul><li>Capital account </li></ul><ul><li>Financial account </li></ul><ul><li>Net errors and omissions account </li></ul><ul><li>Reserves and related items: official reserve account </li></ul>
  5. 5. Current account <ul><li>Net export/import of goods (trade balance) </li></ul><ul><li>Net export/import of services </li></ul><ul><li>Net income (investment income from direct and portfolio investment plus employee compensation) </li></ul><ul><li>Net transfers (sums sent home by migrants and permanent workers aboard, gifts, grants and pensions) </li></ul>
  6. 6. Capital account <ul><li>Capital transfers related to the purchase and sale of fixed assets such as real estate </li></ul>
  7. 7. Financial account <ul><li>Net foreign direct investment </li></ul><ul><li>Net portfolio investment </li></ul><ul><li>Other financial items </li></ul>
  8. 8. Net errors and omissions account <ul><li>Missing data such as illegal transfers </li></ul>
  9. 9. Reserves and related items: official reserve account <ul><li>Changes in official monetary reserves including gold, foreign exchange, and IMF position. </li></ul>
  10. 10. Components of the trade <ul><li>Imports </li></ul><ul><li>-bulk imports: petroleum, crude & products, bulk consumption goods, other bulk items. </li></ul><ul><li>-non bulk imports: capital goods, mainly export related items </li></ul><ul><li>Exports </li></ul><ul><li>-agriculture and allied products, ores and minerals, manufactured goods, mineral fuels. </li></ul>
  11. 11. Import proportion (in %)
  12. 12. Export proportion (%)
  13. 13. Invisibles(%) (12.2) (16.2) C. Income 66.8 76.8 B. Transfers (11.6) (16.3) -miscellaneous 53 44.4 -software services .8 3.2 -transportation 3.1 5.1 -travels 45.4 36.4 A. services 2004-05 2003-04 particulars
  14. 14. BoP in five year plans
  15. 15. In 10 th five year plan
  16. 18. Countries with which India trade <ul><li>OECD </li></ul><ul><li>(1)European union </li></ul><ul><li>-France </li></ul><ul><li>-Belgium </li></ul><ul><li>-Germany </li></ul><ul><li>-UK </li></ul><ul><li>-Italy </li></ul><ul><li>(2) North America </li></ul><ul><li>-Canada </li></ul><ul><li>-USA </li></ul><ul><li>(3) Other OECD </li></ul><ul><li>-Australia </li></ul><ul><li>-Japan </li></ul><ul><li>-Switzerland </li></ul><ul><li>OPEC </li></ul><ul><li>Iran </li></ul><ul><li>Indonesia </li></ul><ul><li>Saudi Arabia </li></ul><ul><li>UAE </li></ul><ul><li>Eastern Europe </li></ul><ul><li>Russia </li></ul><ul><li>Developing countries </li></ul><ul><li>China </li></ul><ul><li>Hong-Kong </li></ul><ul><li>South Korea </li></ul><ul><li>Malaysia </li></ul><ul><li>Sigapore </li></ul><ul><li>SAARC </li></ul><ul><li>Africa </li></ul><ul><li>others </li></ul>
  17. 19. Direction of india’s exports
  18. 20. Direction of india’s imports
  19. 21. Thank you Any questions????????????

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