This document discusses the causes of balance of payments deficits and potential remedies. It notes that a country's balance of payments always balances out overall but can show surpluses or deficits in the current, capital, and gold accounts. Development schemes in developing countries can cause deficits due to high imports needed for industrialization while exports may not increase enough. Other causes include price increases, exchange rate changes, international borrowing and lending, and natural disasters. Suggested remedies include import substitution, export promotion, import liberalization, expenditure reduction, and cost reduction policies.

1. Its Causes & Remedies
Group-5

2.  It is
a record a country's international transactions,
and which (because double entry bookkeeping is
used) always balance out with
no surplus or deficit shown on the overall basis.
 A surplus or deficit, however, can be shown in
any of its three component accounts:
 (1) Current account, (Net amt country earning)
 (2) Capital account, (FDI, portfolio & other inv.)
 (3) Gold account

3.  BOP accounting serves to highlight a
country's competitive strengths and
weaknesses, and helps in achieving
balanced economic-growth.

4.  But Sometimes countries faces severe
economic ups & Downs due to BOP.
 The is because of certain Environmental
causes present in the physical, political,
technical, geographical environment of that
economy.

5.  Development Schemes
-in the developing
countries is the huge investment in
development schemes is cause in these
countries. The propensity to import of the
developing countries increases for want of
capital for industrialization. The exports, on the
other hand, may not increase because these
countries are traditionally primary producing
countries.

6.  Price-Cost Structure-
Increase in prices due to
higher wages, higher cost of raw materials, etc.
reduces exports and makes the balance of
payments unfavourable.
Changes in Foreign Exchange Rates-
An increase in the
external value of money makes imports cheaper
and exports dearer; thus, imports increase and
exports fall and balance of payments become
unfavourable.

7.  International Borrowing and Lending
The
borrowing country tends to have unfavourable
balance of payments, while the lending country
tends to have favourable balance of payments.
 Natural factors
Natural calamities, such as
droughts, floods, etc., adversely affect the
production in the country. As a result, the
exports fall, the imports increase and the
country experiences deficit in its balance of
payments.

8.  Import Substitution-
Government initiatives like
“Make in India”, Skill India, Start-up India etc.
Encourages population to invest in domestic
economy to become self sufficient.
 Export Promotions-
Welcoming Indian Exporters
to flourish Indian trading activities in the foreign
nations to led Indian products reach in faraway
markets.

9.  Import liberalisation in priority areas
 Expenditure-reducing Policy
 Cost Reduction-
Decreasing cost of production, &
hence make our product competitive in global;
markets.