BALANCE OF PAYMENTS

Group 12

Dilip K
Ahmed Mudassar P B
Atul Pal
Jacob George
WHAT IS BOP?

A balance of payments (BOP) sheet is an

accounting record of all monetary transactions
between a country and the rest of the world.

These transactions include payments for the

country’s exports and imports of goods, services,
and financial capital, as well as financial
transfers.
 Composition of the balance of
payments sheet
 Since 1974, the two principal divisions on the BOP
have been the current account and the capital account.

BOP = Current A/C – Capital A/C + - Balancing item

Current A/C -  It is the sum of the balance of trade (net

earnings on exports – payments for imports), factor
income (earnings on foreign investments – payments
made to foreign investors) and cash transfers.
Capital A/C -  It includes the reserve account (the
international operations of a nation's central
bank), along with loans and investments between
the country and the rest of world.
Balancing Item – It is simply an Amount that
accounts for any statistical errors & assures that
the current & capital accounts sum to zero.
 History of balance of payments issues

 Pre-1820: Mercantilism
 1820–1914: Free trade
 1914–1945: Deglobalisation
 1945–1971: Bretton Woods
 1971–2009: Transition, Washington Consensus,
Bretton Woods II
 2009 and later: Post Washington Consensus
 Competitive devaluation after 2009
 TRENDS & PROBLEMS OF INDIA’S
BALANCE OF PAYMENT (1949-2000)
 Protectionist policies
 External Debt
 Export promotion
 Exchange rate
 New Economic Policy
 TRENDS IN INDIA’S BOP (2000-
2010)
 Foreign Investment
 Foreign Exchange Reserves
 Exchange Rate
 Current Account of BOP
 BOP 2008-09 & 2009-10 INDIA
Sl Particulars 2008-09 2009-10
no. US Million $ US Million $
1. Current Account -27915 -38383
2. Capital Account

1. Foreign Investment
a. FDI 19816 18771
b. FII -14031 32396

2. Loans 8318 13259

3. Banking Capital -3246 2084
4. Other Capital -3990 -13016

Total 6768 53397

3. Errors & Omissions 1067 -1573
4. Overall Balance -20080 13441
 CURRENT ACCOUNT DETAILS 2009-2010 - INDIA

Particulars 2008-09 - US Million $ 2009-10 - US Million $

CURRENT ACCOUNT  

I. MERCHANDISE -119,520 -118,374

II.INVISIBLES (a+b+c) 91,605 79,991

a) Services 53,916 35,726

i) Travel 1,469 2,517

ii) Transportation -1,509 -757

iii) Insurance 292 317

iv) G.n.i.e. -404 -86

v) Miscellaneous 54,070 33,735

of which    

Software Services 43,736 48,236

Business Services 3,286 -6,681

Financial Services 1,470 -907

Communication
Services 1,211 -126
b) Transfers 44,798 52,305

i) Official 232 250

ii) Private 44,567 52,055

c) Income -7,110 -8,040

i) Investment Income -6,626 -7,249

ii) Compensation of Employees -484 -791

Total Current Account (I+II) -27,915 -38,383

 INDIA
2005 2006 2007 2008 2009

(In US $ )

CURRENT - - - - -
ACCOUNT 10,283,543,30 9,299,060,317 8,075,694,484 27,915,104,30 38,382,761,17
BALANCE 8 4 1.

FOREIGN 7,606,425,242 20,335,947,44 25,127,155,85 41,315,303,44 34,577,177,46

DIRECT 8 2 7 8
INVESTMEN
TS

PORTFOLIO 12,151,206,54 9,509,114,658 32,862,817,21 - 21,111,850,03

EQUITIES 8 7 15,029,184,81 9
NET 5
INFLOWS

ROYALTIES 671,829,366. 845,949,436. 1,159,824,391 1,528,826,913 1,860,283,808

AND FEES . . .
PAYMENTS 205,974,584 60,913,260 163,126,497 147,815,443 192,555,770
AND
RECEIPTS
 USA
2005 2006 2007 2008 2009
(in US $)

CURRENT - - - - -
ACCOUNT 747,594,600,4 802,640,077,0 718,095,038, 668,858,621, 378,434,537,
BALANCE 77 00 000 000 000

FOREIGN 112,638,000, 243,151,000,0 271,211,000, 328,334,000, 134,710,000,

DIRECT 000 0 000 000 000
INVESTME
NTS

PORTFOLIO 89,258,000,0 145,482,000,0 275,617,000, 126,396,000, 160,534,000,

EQUITIES 00 00 000 000 000
NET
INFLOWS
ROYALTIES 24,612,000,00 23,519,000,00 24,931,000,0 25,781,000,0 25,230,000,0
AND FEES 0. 0. 00. 00. 00.
PAYMENTS
AND 64,395,000,00 70,727,000,00 84,580,000,0 93,920,000,0 89,791,000,0
RECEIPTS 0 0 00 00 00.
 US Trade deficit
  In 2009, the U.S. imported over $253 billion in petroleum-
related products while only exporting $49 billion. This oil-
related deficit of $204 billion was over half of the total 2009
trade deficit of $380.7 billion.
 Consumer products:In 2009, the U.S. ran a $103 billion
deficit, importing $253 billion while only exporting $150
billion.
 Services :It exported $507 billion while importing only $371
billion. This caused a surplus of $136 billion.
US EXPORTS:33 % to Canada and Mexico, 15 % to Japan
,China U.K.
US IMPORTS:33% from Canada and China,10 % from
Mexico ,Japan ,Germany .
 2005 2006 2007 2008
CHINA
2009

(IN US $)

CURRENT 160,818,310,5 253,267,862,3 371,832,620,1 436,107,395,0 297,142,047,9

ACCOUNT 53 59 15 63 69
BALANCE

FOREIGN 79,126,731,41 78,094,665,75 138,413,185,2 147,791,063,8 78,192,727,41

DIRECT 3 1 03 22 3
INVESTMEN
TS

PORTFOLIO 20,346,000,00 42,861,200,00 18,509,607,49 8,721,011,173 28,160,664,46

EQUITIES 0 0 3 3
NET
INFLOWS

ROYALTIES 5,321,253,863 6,634,081,020 8,192,067,402 10,319,466,35 11,065,271,08

AND FEES . 6. 2.
PAYMENTS 157,401,786 204,503,785 342,634,075 570,536,223 429,452,520
AND
RECEIPTS
 China trade Surplus.
 In 2009. Current account surplus: $297.1 Bln
Goods account surplus : $249.5 Bln.
Income account surplus: $ 43.3 Bln.
Current transfer surplus : $33.7 bln.
Service account deficit : $ 29.4 Bln. Transportation: $ 23 bln
Patent fees: $ 10.6 bln
Insurance services:$ 9.7 bln
Tourism : $4 bln.

Surplus is also influenced by:

Factors of production.
Undervaluation of currency.
China exports to : EU ,USA and Honk Kong (around 50 %)
China Imports from:Japan (12- 14%),EU, ASEAN ,South korea ,Taiwan
 RUSSIA
2005 2006 2007 2008 2009

(IN US $ )

CURRENT 84,602,174,30 94,686,391,30 77,768,325,30 103,660,704,7 49,432,638,88

ACCOUNT 0 0 0 00 9
BALANCE

FOREIGN 12,885,807,50 29,701,427,10 55,073,197,80 75,002,416,00 36,750,625,00

DIRECT 0 0 0 0 0
INVESTMEN
TS

PORTFOLIO -99,849,700 6,479,706,600 18,674,599,50 - 3,369,014,500

EQUITYS 0 15,005,353,90
(net inflows) 0

ROYALTIES 1,593,210,000. 2,002,100,000. 2,806,130,000 4,594,540,000 4,106,950,000

AND FEES 260,200,000 299,270,000 . . .
PAYMENTS 396,360,000 453,360,000 493,670,000
AND
RECEIPTS