The document discusses the balance of payments and balance of trade. It defines balance of payments as the record of all monetary transactions between a country and other countries, including capital flows, exports, imports and other payments. It has three components - current account, capital account and financial account. The current account covers short-term transactions while the capital account covers long-term international capital flows. Balance of trade is the difference between a country's exports and imports of goods, and is a component of the current account. It can be in surplus, deficit or balanced. The balance of payments provides a more complete picture of a country's economic status than just the balance of trade.

1. BALANCE OF PAYMENT
&
BALANCE OF TRADE
Presented by-
Dr. Jyoti Khare
Associate Professor
Faculty of commerce
Govt. Degree College
Maldevta, Raipur
Dehradun

2. WHAT IS BALANCE OF PAYMENT?
• BALANCE OF PAYMENTS (the sum total of all economic transactions between
one country and its trading partners around the world), which includes capital
movements (money flowing to a country paying high interest rates of return),
loan repayment, expenditures by tourists, freight and insurance charges, and
other payments
• The balance of payments is a statement of all transactions that are made
between entities in one nation and rest of the world
• Over a particular time frame, such as a quarter or a year.
• To put it in other words, the BoP is a set of accounts that identifies all the
commercial transactions.
• It documents a record of all the monetary transactions performed globally by
the nation on goods, services and income during the year.
• The balance of payments is the difference between the inflow of foreign
exchange and the outflow of foreign exchange.

3. COMPONENTS OF
BALANCE OF PAYMENT
• There are three components of balance of payment viz:
• current account,
• capital account,
• and financial account.
The total of the current account must balance with the total of capital and financial
accounts in ideal situations

4. The current account represents a country's
net income over a period of time, while
the capital account records the net change of
assets and liabilities during a particular year.

6. DIFFERENCE BETWEEN CURRENT
ACCOUNT & CAPITAL ACCOUNT
CURRENT ACCOUNT CAPITAL ACCOUNT
The current account deals with a country's short-term transactions or
the difference between its savings and investments.
The capital account is a record of the inflows and outflows of capital
that directly affect a nation’s foreign assets and liabilities.
These are also referred to as actual transactions output and
employment levels through the movement of goods and services.
It is concerned with all international trade transactions between
citizens of one country and those in other countries.
The current account consists of visible trade, invisible trade , unilateral
transfers, and investment income such as land or foreign shares.
The capital account flow reflects factors such as commercial
borrowings, banking, investments, loans, and capital.
The resulting balance of the current account is approximated as the
sum total of the balance of trade.
The capital account is concerned with payments of debts and claims,
regardless of the time period.
Exports of Goods and Services > Imports of Goods and
services ⇒ Current Account Surplus
Exports of Goods and Services < Imports aof Goods and
Services ⇒ Current Account Deficit
Net Capital Inflow ⇒ Capital Account Surplus
Net Capital Outflow ⇒ Capital Account Deficit

7. WHAT IS BALANCE OF TRADE?
• The balance of trade is the distinction between the value of a nation’s imports and
exports for a given time frame.
• The BoT is the largest constituent of a nation’s balance of payments.
• Economists utilise the BoT to compute the associative potency of a nation’s
economy.
• The BoT is also known as the trade balance or the international trade balance
• The balance of trade is the difference between exports of goods and imports of
goods.
• The net effect of balance of trade is either positive, negative or zero.

8. FEATURES OF BALANCE OF TRADE:
• Various features of balance of trade have been explained below:
• Exports and Imports
• Visible Goods
• Material Goods

9. TYPES OF BALANCE OF
TRADE
FAVOURABLE BoT
UNFAVOURABLE/ DEFICIT BoT
EQUILIBRIUM IN BoT

10. Basis Balance of Trade Balance of Payment
Meaning Balance of Trade or BoT is a financial
statement that captures the nation’s
and export of commodities with the rest of
the world.
Balance of Payment or BoP is a financial
statement that keeps track of all the
economic transactions by the nation with
rest of the world.
Records Goods related transactions. Transactions associated to both goods and
services.
Capital
Transfers
Not included in BoT. Included in BoP.
Which is
better?
Just a partial view of the nation’s economic
status is furnished.
A clear and complete view of the nation’s
economic status is furnished.
Result BoT can either be favourable,
or balanced.
Both the receipts and payments sections
tallies.
Compone
nt
Component of Current Account of the
Balance of Payment.
Both Current and Capital account.
Difference Between BoT & BoP

11. THANK
YOU