Balance of payment,macro economics


Published on

  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Balance of payment,macro economics

  1. 1. MICROECONOMICS PRESENTATION (Under the guidance of Prof.Samik Shome) PRESENTED BY- GROUP-11-Marketing-C Abhiney sharma-10SBCM0186 Kanti nath banerjee-10SBCM0148 Harsh tiwari-10SBCM0448 Pratiksha kastwar-10SBCM0162 Aniket kumar-10SBCM0374 Rishu garg-10SBCM0289 ALLIANCE UNIVERSITY,MARKETING- C,GROUP11
  3. 3.  Record of nation’s international transactions. Keeps a track of incoming and outgoing money. Shows whether a country is a net borrower or net lender. It is one of a concern of a nation for its economic growth ALLIANCE UNIVERSITY,MARKETING- C,GROUP11
  4. 4.  Current account. Trade account-visible. Services-invisible. Income-invisibles. Unilateral transfers-invisibles. Financial account or Capital account. Statistical discrepancy or accommodating capital transactions. ALLIANCE UNIVERSITY,MARKETING- C,GROUP11
  5. 5.  Current account- It is the sum of the balance of trade (net earnings on exports – payments for imports) , factor income (earnings on foreign investments – payments made to foreign investors) and cash transfersentries under Current account might include- Trade – buying and selling of goods and services ◦ Exports – credit entry ◦ Imports – debit entry  Trade balance – the sum of Exports and Imports Factor income – repayments and dividends from loans and investments ◦ Factor earnings – credit entry ◦ Factor payments –debit entry  Factor income balance – the sum of earnings and payments. ALLIANCE UNIVERSITY,MARKETING- C,GROUP11
  6. 6. Capital account- Where trade involving financial assets & International investments are recorded . It shows the inflows & outflows of capital.Credit : foreign countries buying financial assets in India such as land and buildingsDebit: India buying financial assets in foreign countries.Statistical discrepancy or accommodating capital transactions- Called as omissions and errors. Government cannot accurately measure all transactions that take place. ALLIANCE UNIVERSITY,MARKETING- C,GROUP11
  7. 7.  Deficit is the amount by which debit exceeds credit Surplus is the amount when credit exceeds debitTypes of deficit: current account deficit:  Visible deficit or trade deficit: merchandise account  Invisible deficit: service account, income account, unilateral transfers Financial account deficit: Basic deficit : current account deficit + FDI ALLIANCE UNIVERSITY,MARKETING- C,GROUP11
  8. 8.  Adjustments of exchange rates: An upwards shift in the value of a nations currency relative to others will make a nations exports less competitive and make imports cheaper and so will tend to correct a current account surplus. It also tends to make investment flows into the capital account less attractive so will help with a surplus there too. Conversely a downward shift in the value of a nations currency makes it more expensive for its citizens to buy imports and increases the competitiveness of their exports, thus correcting a deficit. ALLIANCE UNIVERSITY,MARKETING- C,GROUP11
  9. 9.  Nations can agree to fix their exchange rates against each other, and then correct any imbalances that arise by rules based and negotiated exchange rate changes and other methods ALLIANCE UNIVERSITY,MARKETING- C,GROUP11
  10. 10. Account Net balanceMerchandise -$214710Services $38,175Income $30,835Unilateral transfers -$28,390CURRENT ACCOUNT -$174,091FINANCIAL ACCOUNT $116,187Statistical discrepancy -$39,487 ALLIANCE UNIVERSITY,MARKETING- C,GROUP11
  11. 11.  India facing BOP disequilibrium since Indipendence,culminating a disaster in 1990-91. It was always under pressure & had a huge deficit due high import of food grains & goods, heavy external borrowing, payments & poor export. Govt implied Protectionist policies(1956-61) to boost domestic Industrialization as an import substitution, thus enhancing the export. But high degree of protection in Indian industries led to inefficiency & poor product to compete with the world market as well as in Indian market too. Lack of competition & higher production cost also led to poor export. To curb the BOP imbalance out of panicky,Govt resorted large scale foreign borrowings for its developmental efforts which backfire Indian economy as debt service obligations rose sharply. ALLIANCE UNIVERSITY,MARKETING- C,GROUP11
  12. 12.  An economic recovery from 1968–69, however, eased the problem, and by September 1970, foreign exchange reserves amounted to $616 million, as compared with $383 million by December 1965. Reserves declined to $566 million by the end of 1972 but increased to $841 million as of 1975. Indian export was dependent on world trade situations, as we were basically primary product exporters, the earnings was low & unstable, the quality was low too. The instability of the exchange value was also a problem for Indian export,govt had strongly an inward looking policy. The process of liberation started form mid 80s,restriction on certain Imports were removed, but the situation was already out of hand which led to 1990-91 crisis. Today although we have BOP imbalances its devolved and more productive than last decade. ALLIANCE UNIVERSITY,MARKETING- C,GROUP11