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Balence of payments of India

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This PPT all about India’s Balance of Payment of three year comparison which is 2009-10, 2010-11, 2011-12.

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Balence of payments of India

  1. 1. Balance of Payment AnalysisPresented by-Nilesh PatilAbhijit PatilMrunmayi PatilSaurav NaikDeepak Maru 07/17/12 International Finance _ 1 1
  2. 2. What Is BOP ? The balance of payments accounts are those that record all transactions between the residents of a country and residents of all foreign nations. The BOP is determined by the countrys exports and imports of goods, services, and financial capital, as well as financial transfers. It reflects all payments and liabilities to foreigners (debits) and all payments and obligations received from foreigners (credits). Balance of payments is one of the major indicators of a countrys status in international trade 07/17/12 International Finance _ 1 2
  3. 3. BOP Consists of◦ The Current Account◦ The Capital Account◦ Official Reserves Account◦ Errors and Omissions 07/17/12 International Finance _ 1 3
  4. 4. Current Account Includes all imports and exports of goods and services. Includes unilateral transfers of foreign aid. If the debits exceed the credits, then a country is running a trade deficit. If the credits exceed the debits, then a country is running a trade surplus. 07/17/12 International Finance _ 1 4
  5. 5. Current Account1. Export & Import of Merchandise & Services3. Income Account (The income account accounts mostly for investment income from dividends and interest on credit and payments on foreign taxes.)5. Transfer payment (Grants received / given, Pvt. Transfer) 07/17/12 International Finance _ 1 5
  6. 6. Capital Account Foreign Investment(FDI, FII)n Banking Capital (NRI Deposits)( Short term creditt External Commercial Borrowings(ECB) 07/17/12 International Finance _ 1 6
  7. 7. Capital Account If foreign ownership of domestic financial assets has increased more quickly than domestic ownership of foreign assets in a given year, then the domestic country has a capital account surplus. On the other hand, if domestic ownership of foreign financial assets has increased more quickly than foreign ownership of domestic assets, then the domestic country has a capital account deficit. 07/17/12 International Finance _ 1 7
  8. 8. Official International Reserves  The official international reserve account records the change in stock of official international reserve assets (also known as foreign exchange reserves) at the countrys monetary authority .  Official reserves assets include gold reserves, foreign currencies, SDRs, reserve positions in the IMF.  {Special Drawing Rights (SDRs) are potential claims on the freely usable currencies of IMF members.} 07/17/12 International Finance _ 1 8
  9. 9. Net errors and omissions This is the last component of the balance of payments and principally exists to correct any possible errors made in accounting for the three other accounts. They are often referred to as "balancing items". 07/17/12 International Finance _ 1 9
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  11. 11. Major Highlights of BOP during April-March 2011-12 During the financial year 2011-12, while growth in exports decelerated sharply to 23.6 per cent (37.5 per cent in 2010-11), imports grew by 31.1 per cent as compared with 26.7 per cent in the previous year, mainly reflecting higher imports of gold & silver. Imports of oil, which grew by 46.9 per cent, and of precious metals which grew by 49.4 per cent, together contributed nearly 45 per cent of total imports during the year. Especially, international price of the Indian basket of crude oil increased from US$ 85.1 per barrel in 2010-11 to US$ 111.9 per barrel in 2011-12. Consequently, the trade deficit widened to US$ 189.7 billion in 2011-12 from US$ 130.4 billion in 2010-11. 07/17/12 International Finance _ 1 11
  12. 12.  During the year, CAD widened to the highest ever level both in absolute terms and as a proportion of GDP. The CAD at US$ 78.2 billion was 4.2 per cent of GDP in 2011-12 as compared with US$ 46.0 billion or 2.7 per cent of GDP during the previous year. The rise in CAD-GDP ratio was also resulted from slower GDP growth and its contraction in dollar terms due to depreciation of rupee. FDI inflows and NRI deposits, in net terms, were higher at US$ 22.1 billion and US$ 11.9 billion, respectively, while portfolio net flows slowed down to US$ 16.6 billion in 2011-12. 07/17/12 International Finance _ 1 12
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  14. 14. Major Highlights of BOP during April-March 2010-11 During the year as a whole i.e. April-March 2010-11, despite improvement in net invisibles surplus, higher trade deficit led to increase in absolute size of current account deficit. However, as a proportion of GDP, CAD was marginally lower than the preceding year. In absolute terms, on BoP basis, the trade deficit widened to US$ 130.5 billion (7.5 per cent of GDP) during 2010-11 from US$ 118.4 billion (8.6 per cent of GDP) a year ago. Net invisibles earnings increased to US$ 86.2 billion from US$ 80.0 billion last year. The CAD at US$ 44.3 billion works out to 2.6 per cent of GDP during 2010-11 as compared to US$ 38.4 billion (2.8 per cent of GDP) a year ago. 07/17/12 International Finance _ 1 14
  15. 15.  Net capital inflows increased to US$ 59.7 billion mainly driven by external assistance, short-term trade credits, ECBs and banking capital. Although net capital inflows were higher, accretion to foreign exchange reserves during 2010-11 was marginally lower as a larger share of increased flows was absorbed by the widened current account deficit. 07/17/12 International Finance _ 1 15
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  17. 17. Major Highlights of BOP during April-March 2009-10 On a BoP basis, the trade deficit decreased marginally to US$ 117.3 billion (8.9 per cent of GDP) during 2009-10 from US$ 118.7 billion (9.8 per cent of GDP) a year ago. The current account deficit was higher at US$ 38.4 billion (2.9 per cent of GDP) during 2009-10, as compared with US$ 28.7 billion (2.4 per cent of GDP) during 2008-09, mainly due to lower net invisibles surplus. The surplus in the capital account increased sharply to US$ 53.6 billion (4.1 per cent of GDP) during the year from US$ 7.3 billion (0.6 per cent of GDP) a year ago. 07/17/12 International Finance _ 1 17
  18. 18.  As the surplus in the capital account exceeded the current account deficit, there was a net accretion to foreign exchange reserves of US$ 13.4 billion during 2009-10 (as against a drawdown of reserves of US$ 20.1 billion during 2008-09). 07/17/12 International Finance _ 1 18
  19. 19. Thank You 07/17/12 International Finance _ 1 19

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