2. Project made by :
ANKITA JAMSANDEKAR
MEGHASHREE PUJARI
RESHMA LATURE
AKANKSHA DARVATKAR
ANJALI SARDA
AMRAPALI CHOUDHARY
PROJECT MADE BY :
3. INTRODUCTION
The balance of trade is the difference between the monetary value
of exports and imports of output in an economy over a certain
period. If a country exports a greater value than it imports it is
called trade surplus , positive balance or a favorable balance and
conversely if a country imports a greater value than it exports it is
called as trade deficit ,negative balance or an informally ‘trade
gap’.
Trade balance comprises those products that a country trades on
with other countries.
5. General Information
BOT is the largest component of a country’s
balance of payments.
Debit items includes imports, foreign aid ,
domestic spending, domestic investments etc.
As well as Credit items includes exports,
foreign spending and investments in the
domestic economy. BOT is also referred to as
“trade balance” and also “international trade
balance” .
Through BOT analysis we can conclude
whether a economy is in trade deficit
(more of imports ) or in trade surplus (more
of exports ) .
6. TYPES OF BOT
• Favorable BOT: Balance of trade is said to be
favorable when total value of exported goods of
a country exceeds her total value of imported
goods.
•Unfavorable or Adverse BOT: Balance of trade is
said to be unfavorable when total value of imports of
goods of a country exceeds a total value of exports of
goods.
•Equilibrium balance of trade : Balance of trade is
said to be equilibrium when total value of exports of
goods of a company is equal to her total value of
imports of goods.
7. BOT DEFICIT
• BOT deficit is the negative value of goods
exported out of a country less the value of
goods and services imported into the country.
• A BOT deficit is also termed as ‘’ unfavorable’’
balance of trade because it results in a net
outflow of monetary payments from the
domestic economic to the foreign sector,
which tends to be bad for the country.
8. Causes of BOT Deficit
• Not enough companies involved in exporting.
• Companies are not internationally
competitive.
• Over-rating of the country’s currency.
• Government’s budget deficit.
9.
10. BOT IN INDIA
India has been recording sustained trade deficits since 1980
mainly due to the high growth of imports , particularly of
crude oil , gold and silver. In recent years, the biggest
trade deficits were recorded with China , Saudi Arabia ,
Iraq , Switzerland , and Kuwait . India records trade surplus
with U.S.A , Singapore , Germany , Netherlands and United
Kingdom .
11.
12. INTRODUCTION
Balance of payment is a broader term and it includes balance of
trade.
Balance of payment refers to the net results that are drawn
recording all the visible and invisible items that are imported and
exported from the country.
Balance of payment such as ,provides a comprehensive statement
over the net results of foreign trade and gives a true picture as to
where the country stands in the international trade . Balance of
payment clearly expose the economic viability ,strength and
capability by correctly measuring its imports and exports
,competency in goods and services as well as technical know-how.
13. Nature of BOP
• Systematic record and comprehensiveness.
• Fixed Period Of Time
• Double Entry System And Self Balanced.
• Adjustment Of Difference.
• Government And Non-government terms.
14. Factors affecting BOP.
• Cost of production.
• Cost and availability.
• Demand and supply.
• Exchange rate movements.
• External pressure.
15. Importance of BOP.
• Forecasting : BOP helps forecasting a country’s potential ,
especially in the short run.
• Indicator of pressure : BOP is an important indicator of
pressure on a country’s foreign exchange rate, and thus on the
potential of a firm trading with or investing in that country to
experience foreign exchange gains or losses.
• Signal or imposition : Changes in a country’s BOP may also
signals the imposition(removal) of controls over payment of
dividends and interest , license fees , royalty fees , etc.
• Judging the stability : Judging the stability rate of a floating
exchange rate system is easier with BOP as the record of exchanges
that take place between nations .
16.
17. DISEQUILLIBRIUM IN BOP
• A disequilibrium in the BOP may appear either as
a surplus or as deficit.
• A SURPLUS in BOP occurs when total receipts
exceeds total payments. Thus,
BOP=credit>debit.
This is called an “favorable balance”.
• A DEFICIT in BOP occurs when total payments
exceeds total receipts. Thus,
BOP=credit<debit.
This is called an “unfavorable balance”.
18. DIFFERENCE BETWEEN BOT & BOP
BOT
• It is a statement that
captures the country’s
exports & imports of goods
with remaining world.
• It keeps records of
transactions related to
goods only.
• Capital transfers are not
included in the balance of
trade.
BOP
• It is a statement that
keeps track of all
economic transactions of a
country done with
remaining world.
• Here , transactions of both
goods and services are
recorded.
• Capital transfers are
included in balance of
payment.
19. • BOT gives partial view of
the country’s economic
status.
• The results gained can
be favorable ,
unfavorable and or in
equilibrium.
• BOP gives a clear view
of the economic
position of the country.
• Here ,both the receipt
and payment sides
tallies.
