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Balance of payments
Balance of payments
Balance of payments
Balance of payments
Balance of payments
Balance of payments
Balance of payments
Balance of payments
Balance of payments
Balance of payments
Balance of payments
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Balance of payments

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  • 1. BALANCE OF PAYMENTS
  • 2. MEANING Balance of Payments (BoP) is an accounting system that records the economic transactions between the residents and Government of a particular country with the rest of the world.  Economic transactions includes imports and exports of goods and services, capital inflows and outflows, gifts and other transfer payments and changes in a country’s international reserves.  BoP is important to investors, MNCs , business managers, consumers and Govt. officials as it affects the value of currency and also influences macro economic variables like GNP, interest rates, exchange rate, price level etc.., 
  • 3. HOW IS BOP PREPARED? The Reserve Bank of India (RBI) is responsible for compiling the balance of payments for India.  In accordance with the Foreign Exchange Management Act (FEMA) of 1999, all foreign exchange transactions must be channeled through the banking system which must submit various periodical returns and supporting documents  Transactions that are not routed through banking channels, information is obtained directly from the relevant government agencies, concerned agencies, and departments within the RBI.  The information is also supplemented by data collected through various surveys conducted by the RBI. Data are prepared on a quarterly basis and are published in the Reserve Bank of India Bulletin. 
  • 4. BOP STATEMENT  Balance of payment (BoP) comprises of current account, capital account, errors and omissions and changes in foreign exchange reserves.
  • 5.    The Current Account This account is typically divided into 3 categories namely merchandise trade balance, services balance and balance on unilateral transfers. The Capital Account This account is sub categorized into direct investment, portfolio investment and other capital flows. Official Reserves Account These are Government owned assets. It represents purchases and sales by RBI. It is necessary to account for deficit or surplus in BoP.
  • 6. STATISTICS OF BOP
  • 7. The current account registered an improvement in the first quarter (April-June) of FY13 over Q1 FY12, with current account deficit (CAD) declining to US$ 16.4 billion, from US$ 17.4 billion. This reduction in deficit has been supported by a sharper decline in imports as compared with exports.  However, as a proportion of GDP, CAD rose to 3.9% in Q1 FY13 when compared with 3.8% in Q1 FY12. This may be attributed to the fall in GDP growth and the depreciation of the rupee depreciation by about 17% against the dollar during this quarter. 
  • 8. HIGHLIGHTS ‡ ‡ ‡ ‡ ‡ Goods exports recorded a decline of 2.6% while imports registered a sharper decline of 3.6% Trade deficit amounted to US$ 42.5 billion, i.e. 10.0% of GDP (as against 9.8% in Q1 FY12) Net exports of services declined 13.0% during Q1 FY13 over Q1 FY12 on account of lower growth in receipts in transportation, travel, construction, insurance & pension services and other business services sectors. Net inflows under capital witnessed a decline, primarily on account of moderation in foreign direct investment (FDI) inflows and loans by banks and non-banks Net secondary income (private transfers/remittances) receipts remained buoyant at US$ 16.8 billion, benefitted by the depreciating rupee;
  • 9. INDIA’S POSITION OF BOP With only enough cash in the RBI to pay for seven months of imports and weak fund inflows, the balance of payments position is undermining its ability to defend a tumbling rupee.  India has $280 billion of foreign exchange reserves, by far the lowest of the BRICs, the four major emerging market economies.  By the end of this fiscal year, India needs to repay $172 billion of liabilities such as foreign borrowings, trade credit, and private debts which is almost 45% of its overall external borrowings and equivalent to 59% of its reserves. 
  • 10. CHALLENGES & MEASURES  The room to increase exports in the short run is limited, as they are dependent upon the recovery and growth of partner countries, especially in industrial economies.  The main focus has to be on curbing imports, mainly by making oil prices more market determined, and curbing imports of gold.  At the same time, further measures to ease the inflow of remittances and steps to diversify software exports could help reduce financing needs.  Greater emphasis on FDI & FII, including opening up sectors further can help increase the quantum of safe financing.  Finally, external commercial borrowing needs to be monitored carefully
  • 11. THANK YOU

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