BALANCE OF PAYMENTS - An Insight Prabhash Jha [email_address] IBS, Hyderabad
Balance of Payments Account It is an itemization of the factors behind the demand for and supply of a currency. All transactions done by a resident of the country with the rest of the world. CURRENT ACCOUNT CAPITAL ACCOUNT OFFICIAL RESERVE ACCOUNT Export/Import Transfer Payments Factor Payments FDI/FII Portfolio Investments NRE / NRE A/Cs Gold Reserves Forex Reserves IMF Loans
Export Import & Trade Deficit <ul><li>2004-05 Vs 2003-04 </li></ul><ul><li>Petroleum & related product, Iron ore, Capex items, Gold & silver imports gone up by more than 50%. </li></ul><ul><li>2005-06 Vs 2004-05 and on wards </li></ul><ul><li> Major contributors came from Capex items & Petroleum related products. </li></ul>A comparison of Import data
Capital Account <ul><li>Major contributions comes form FDI / FII / ECBs due to liberalisation on capital account transactions. </li></ul><ul><li>Initiatives taken towards capital account convertibility. </li></ul>** 2007-08 (FDI) : April to July 2007. ** 2007-08 (FII) : April to 19th Oct 07. 15.93 5.48 9.33 10.18 FII (bn $) 6.61 19.53 7.72 6.05 FDI (bn $) 2007-08** 2006-07 2005-06 2004-05 FDI / FII Inflow Statistics
Reserve Usage It is basically balancing amount in Balance of Payment accounts.
<ul><li>Building up of Forex Reserve to safeguard unforeseen future. </li></ul><ul><li>Enhancement of capacity of production through import of capex items. </li></ul><ul><li>Flow of FDIs / FIIs etc are gearing up to bring economic growth. </li></ul><ul><li>Hugh capital inflow in recent time have lead to rupee appreciation which checked up inflation and interest rates. </li></ul>Conclusion 253.32 239.96 221.51 219.75 206.11 200.70 196.90 191.92 145.11 135.57 Forex Res (In Bn $) Oct-07 (19 th Oct) Sep-07 Aug-07 Jul-07 Jun-07 May-07 Apr-07 Mar-07 Mar-06 Mar-05 Months