BALANCE OF PAYMENTS

A Presentation By:
Sunil Kumar Agrawal
Head, Faculty of Management
Galaxy Global Group of Institutions
Dinarpur, Ambala.
The Balance of Payments is a comprehensive record of economic
transactions of the residents of a country with the rest of the world.

The balance of payments record the flow of economic transactions

between the residents of a given country and the residents of other
countries during a certain period of time.

In other words, it is a statistical statement for a given period showing

a. Transactions in goods, services and income between an economy
and rest of the world
b. Changes of ownership and other changes in that economy’s
monetary gold, Special Drawing Rights (SDRs) and claims on the
liabilities to the rest of the world, capital transfers and
c. Unrequited transfers and counterpart entries that are needed to
balance, in the accounting sense, any entries for the foregoing
transactions and changes which are not mutually offsetting.
COMPONENTS OF THE BALANCE OF PAYMENTS

International economic transactions of a country are broken

down into components for systemic classification in a
formalized reporting structure.
In India, RBI publishes balance of payments data on a
monthly basis as per the format in Table on next slide
ItemsCredits Debits Net
CURRENT ACCOUNT
I. Merchandise
(i)Private
(ii) Government
II. Invisibles
1. Travel
2. Transportation
3. Insurance
4. Investment
5. Government, not included elsewhere
6. Miscellaneous
7. Transfer payments
(i) Official
(ii) Private
A. TOTAL CURRENT ACCOUNT (I+II)

CAPITAL ACCOUNT
I. Private
(i) Long Term
(ii) Short Term
II. Banking
III. Official
(i) Loans
(ii) Amortisation
(iii) Miscellaneous
B. TOTAL CAPITAL ACCOUNT (I + II + III)
C. IMF
D. SDR ALLOCATION
E. Capital Account, IMF and SDR Allocation (B + C + D)
F. Total Current Account, Capital Account, IMF and SDR Allocation (A + E)
G. ERRORS AND OMMISSIONS
H. RESERVES AND MONETARY GOLD
 BALANCE OF PAYMENTS & International Economic
Linkages

Through BoP studies, we can understand that if a nation

produces more than it spends will save more than it invests,
export more than it imports, and wind up with a capital
outflow.

In the same way, a nation which spends more than it produces

will invest more than it saves, import more than it exports,
and wind up with a capital inflow.