TRINITY INSTITUTE OF PROFESSIONAL STUDIES

Sector – 9, Dwarka Institutional Area, New Delhi-75Affiliated Institution of G.G.S.IP.U, Delhi

INDIAN ECONOMYBBA(G)17203

BYREENA YADAV

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

BALANCE OF TRADE (BOT)

• BOT is a merchandise balance.• It refers to the difference in the value of

imports and exports of goods.• If the value of exports of goods is more then

the value of import of goods, then it is called favorable BOT and vice versa.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

BALANCE OF PAYMENT (BOP)

• BOP is a systematic record of a country’s external economic transactions over a period of one year.

• BOP is an accounting statement that provides a systematic record of all economic transactions between the residents of a country and the rest of the world in a given period of time, usually one year.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

DIFFERENCE BETWEEN BOT AND BOP

BALANCE OF TRADE BALANCE OF PAYMENT

It records transactions relating to trade of goods only.

It records transactions relating to both goods and services.

Balance of trade account does not record transactions of capital nature.

Balance of payment account records transactions of capital nature.

It is a part of current account of the balance of payments.

It is more comprehensive and has three accounts of which balance of trade is a part.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

COMPONENTS OF BALANCE OF PAYMENTS

Components of BOP

Current account

Merchandise

Invisibles

Capital account

Foreign investment

Loans

Banking capital

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

CAUSES OF UNFAVOURABLE BALANCE OF PAYMENTS

Import of machinery

Import of war equipments

More demand of goods

Increase in imports

Expenditure on foreign embassies

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

CAUSES OF UNFAVOURABLE BALANCE OF PAYMENTS

Competition from foreign countries

Increase in consumption and prices of crude oil

Payments of interest on foreign

debts

Less growth in exports

Disintegration of USSR

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

POLICY MEASURES TO MANAGE BOP

Import substitution

Export promotion

Tapping invisibles

Increasing efficiency

Encouragement of tourist traffic

Bilateral agreements

Exchange inflows of

foreign capital