Balance of payment, disequlibrium

1. BoP, DISEQULIBRIUM,
CORRECTION

2. Balance of Payment
Systematic and summary record
Shows country’s economic and
financial transaction with rest of the
world
Measures over a period of time.
As on 25/08/2012,foreign exchange reserve $297 B down
by $258 M

3. Table- Balance of Payments account
Credits(+) (Receipts) Debits(-)Payments
Current Account
Exports Imports
(a) Goods Goods
(b) Services Services
(c) Transfer payments Transfer payments
Capital Account
Borrowing from Lending to Foreign Countries
Foreign countries
Direct Investments
By Foreign countries Direct Investments in Foreign
countries
Official Settlements Account
Increase in Foreign Official Holdings Increase in Official Reserve
of Gold and Foreign Currencies
Errors and Omissions

4. BoP for April-June (Q1) of 2010-11

5. DISEQULIBRIUM
Inequality in the amount of foreign exchange of one
country with the rest of the world
SURPLUS
SUPPLY DEMAND
DEFICIT
SUPPLY DEMAND

6. Causes of disequilibrium in BoP
Temporary causes
National Income
Inflation
Economic Development
Borrowing and Lending
Change in exchange rate
Political factors-like instable govt.

7. Correction of BoP disequilibrium
Automatic correction Deliberate measures
Monetary measures Trade measures Miscellaneous measures
Export promotion Import control

8. Monetary Measure
Monetary contraction/expansion
Devaluation/valuation
Exchange control

9. Miscellaneous measure
Foreign loans
Incentives for foreign investments
Tourism development
Incentives for foreign remittances
Import substitution

10. Export promotion Import control
Abolition/reduction of
export duties • Import duties
Export subsidies • Import control
• Import prohibition
Export incentives

11. General measure
Exchange depreciation (price effect) or devaluation
(by government)
Deflate the currency
Tariffs
Import quotas
Export duties

12. …………QUESTION?