Adverse Balance of Payment

International Business

1. Adverse Balance of Payment Its Causes & Remedies Group-5

2. It is a  record a country's international transactions, and which (because double entry bookkeeping is used) always balance out with no surplus or deficit shown on the overall basis. A surplus or deficit , however, can be shown in any of its three component accounts: (1)  Current account , (Net amt country earning) (2)  Capital account , (FDI, portfolio & other inv.) (3)  Gold account What does BOP Means?

3. BOP accounting serves to highlight a country's competitive strengths and weaknesses, and helps in achieving balanced economic-growth.

4. But Sometimes countries faces severe economic ups & Downs due to BOP. The is because of certain Environmental causes present in the physical, political, technical, geographical environment of that economy.

5.  Development Schemes -in the developing countries is the huge investment in development schemes is cause in these countries. The propensity to import of the developing countries increases for want of capital for industrialization. The exports, on the other hand, may not increase because these countries are traditionally primary producing countries. Prominent Causes

6. Price-Cost Structure- Increase in prices due to higher wages, higher cost of raw materials, etc. reduces exports and makes the balance of payments unfavourable. Changes in Foreign Exchange Rates- An increase in the external value of money makes imports cheaper and exports dearer; thus, imports increase and exports fall and balance of payments become unfavourable.

7. International Borrowing and Lending The borrowing country tends to have unfavourable balance of payments, while the lending country tends to have favourable balance of payments. Natural factors Natural calamities, such as droughts, floods, etc., adversely affect the production in the country. As a result, the exports fall, the imports increase and the country experiences deficit in its balance of payments.

8. Import Substitution- Government initiatives like “ Make in India” , Skill India, Start-up India etc. Encourages population to invest in domestic economy to become self sufficient. Export Promotions- Welcoming Indian Exporters to flourish Indian trading activities in the foreign nations to led Indian products reach in faraway markets. Remedies in this regard?

9. Import liberalisation in priority areas Expenditure-reducing Policy Cost Reduction- Decreasing cost of production, & hence make our product competitive in global; markets.

10. Thank You