BALANCE OF PAYMENT - MEANING, COMPONENTS AND Disequilibrium

1. INTERNATIONAL BUSINESS
Presented by
Sahana B H
2nd M.Com Under the Guidance of
Miss Ramya S. K.
Faculty Member,
Dept. of PG Studies in Commerce
G. F. G. C. W. Holenarsipura

2. CONTENTS
 Introduction about international business and
balance of payment
 Meaning of balance of payment
 Components of balance of payment
 Disequilibrium in balance of payment
 Conclusion.

3. INTRODUCTION
The multinational companies which were producing the products in their
home countries and marketing them in a various foreign countries before
1980”s , after they started locating their plants in other countries
Ex: “UNILEVER ESTABLISHED ITS SUBSIDIARY COMPANY IN INDIA”(London u k )
A balance of payments is a double entry system of record of all economic
transaction between the residents of a country and rest of the world
carried out in a specific period of time .
This Photo by Unknown Author is licensed under CC BY-SA

4. BALANCE OF TRADE AND BALANCE OF
PAYMENT
The balance of trade is a narrow
Term it takes into account only
merchandise exports and
imports, consider only exports
and imports of visible items.
The balance of payments takes
into account the export and
import both the visible and
invisible items.
Ex: consumer durables,
technical equipment, and
banking, insurance services ,
tourism, transportation, etc….

5. COMPONENTS OF BALANCE OF PAYMENT
• CURRENT ACCOUNT.
• CAPITAL ACCOUNT.
• UNILATERAL PAYMENTS ACCOUNTS.
• OFFICIAL SETTLEMENTS ACCOUNTS.

6. CURRENT ACCOUNT
• Current A/C includes both visible and invisible exports and imports
• Debit current a/c includes merchandise imports and invisible imports.(ex:
goods and tourism.)
• Credit current a/c includes merchandise exports.
• Most of the transactions are on credit basis

7. CAPITAL ACCOUNT
C A, is divided into 3 parts
1. Private capital-( long term and short term capital.)
2. Banking capital
3. Official capital
Capital account basically consists of credits and debits ,credits include
foreign long term investment in the home country. Debit side of capital
account includes long term
Investments in foreign countries.

8. UNILATERAL TRANSFER AND OFFICIAL SETTLEMENTS ACCOUNTS
Unilateral transfer accounts: giving the gifts these includes government grants
,remittances, disaster relief etc…….
ex: India gave grant to UGANDA in 1998.
Official settlements accounts: official settlements account represent official
sales of foreign currencies and other reserve to foreign countries or official purchase of foreign
currencies or other reserves from foreign countries.

9. TOTAL EXPORTS ,TOTAL IMPORTS AND BALANCE OF PAYMENT OF SELECTED COUNTRIES IN 2012
(BILLION DOLLARS)
Country Merchandi
se exports
Services
exports
Total Imports Services
Imports ₹
BOP
China 2049 190 2239 1818 280 2098 +141
United
States
1549 621 2167 2236 411 2647 -480
Germany 1407 257 1664 1167 293 1460 +204
Japan 799 142 942 886 175 1061 -119

10. DISEQUILIBRIUM IN BALANCE OF PAYMENT
1. DEVELOPMENT DISEQUILIBRIUM
2. CYCLICAL DISEQUILIBRIUM
3. SECULAR DISEQUILIBRIUM
4. STRUCTURAL DISEQUILIBRIUM.

11. CONCLUSION
The balance of payment of a country reveals its
financial and economic status, a BOP statement can be
used as an indicator to determine whether the country
currency value is appreciating or depreciating . The
balance of payment statement helps the governments
to decide on fiscal and trade policies.

12. BIBLIOGRAPY
Information Retrieved from International Business (Text & cases)
Written by – P. subba Rao