Countries over all statement of economic transaction with rest of the world over some period. Usually one year period. It contains all inflows & outflows (Payment and receipts). Either it is surplus or deficit. It can be broke down into balance of trade, current account (In trade, service, remittance). Capital account (Investment & borrowing). Trade account is a part of current account. Foreign trade is a part of BOP.
BOP 1990’s Crises
- Due to gulf war & cumulative problems in our economy.
- Trade deficit gone high.
- India’s imported bill depleted the reserves.
- Rise in oil prices made inadequacy of reserves.
IMF has given India bail out.
- It rained funds through bonds & foreign exchange immunity scheme.
- Rupee devalued.
- Companies are allowed to raise capital from abroad.
- Welcomed FDI.
Result – > Gradually Rupee brought in 1992-93 Budgets Onwards. Article VIII of IMF, then India adopts current account convertibility.
BOP & Invisibles
- Invisibles – International trade synonym for “Services”.
- Visible – International trade synonym for “goods”.
- Service – Computer, Financial, and Professional etc…
- Income – Income earned by Indians & ownership of assists in abroad.
- Transfer – Remittance from Indians working abroad.
- Working abroad. ($ fob expected).
- UAE & Saudi Arabia (27%)
- North America (USA) also one of the most importance country.