BOP is the statistical statement systematically summarizes for a specific period of time, the monetary transactions of an economy with the rest of the world.

1. BALANCE
OF
PAYMENT
VIJYATA

2. Balance of Payments
Balance of Payments (BOP) is a
statistical statement that
systematically summarizes, for a
specified period of time, the monetary
transactions of an economy with the
rest of the world. BOP data help
measure financial transactions
between residents of the country and
residents of all other countries.

3. BALANCE OF PAYMENT
FACTS
Transactions include exports
and imports of goods and
services, income flows, capital
flows, and gifts and similar
one-sided transfer payments

4. BALANCE OF PAYMENT
FACTS
 BOP is an accounting statement
prepared on double entry book-
keeping system. All currency inflows
are recorded as credits, and outflows
are recorded as debits. Credits
indicate a sign of surplus, and debits
have a minus sign

5. COMPONENETS OF BOP
Current account
Capital account
Unilateral account
Official reserves account

6. CURRENT ACCOUNT
 Current account records all flows of goods,
services, and transfers.
 Current account itself can be broken into two
parts:
 balance on trade (BOT)- deals only with exports
and imports of merchandise (or visibles )
 balance on invisibles (BOI)- shows net receipts
on invisibles such as dividends or interest on
foreign investments, royalties on patents or trade
marks held abroad, travel, insurance, banking,
transportations, and unilateral transfers.

7. CAPITAL ACCOUNT
 Capital account records all public and private
investment and lending activities. The capital
account is segmented by
 direct foreign investment,
 portfolio investment, and
 other capital investment
In general, direct foreign investment measures the
expansion by firms in foreign operations, while
the portfolio investment and other capital
investment measure the net flow of funds due to
financial asset transactions between individual or
institutional investors.

8. Direct foreign investment
 Direct foreign investment represents the
investment in fixed assets in foreign countries.
Examples of direct foreign investment include
a firm’s acquisition of a foreign company, its
creation of a new manufacturing facility or its
expansion of an existing plant in a foreign
country.

9. Portfolio investment
 Portfolio investment represents transactions
involving long-term financial assets (such as
stocks and bonds) between countries that do
not affect the transfer of control

10. other capital investment
 represents transactions involving short-term
financial assets (such as money market
securities) between countries

11. UNILATERAL TRANSFERS
 Includes gifts, private remittances ,
government grants , reparations and disaster
relief.

12. OFFICIAL RESERVES
ACCOUNT
 This account measures changes in holdings of
gold and foreign currencies (reserve assets)
by official monetary institutions. The change in
official reserves measures a nation’s surplus
or deficit on its current and capital account
transactions by netting reserve liabilities from
reserve assets. For example, a surplus will
lead to an increase in official holdings of
foreign currency and/or gold; a deficit will
normally cause a reduction in these asset