BALANCE OF PAYMENT - MEANING, COMPONENTS AND Disequilibrium

BALANCE OF PAYMENT - MEANING, COMPONENTS AND Disequilibrium

1. INTERNATIONAL BUSINESS BALANCE OF PAYMENT Presented by Sahana B H 2 nd M.Com Under the Guidance of Miss Ramya S. K. Faculty Member, Dept. of PG Studies in Commerce G. F. G. C. W. Holenarsipura

2. CONTENTS Introduction about international business and balance of payment Meaning of balance of payment Components of balance of payment Disequilibrium in balance of payment Conclusion.

3. INTRODUCTION The multinational companies which were producing the products in their home countries and marketing them in a various foreign countries before 1980”s , after they started locating their plants in other countries Ex: “UNILEVER ESTABLISHED ITS SUBSIDIARY COMPANY IN INDIA”( London u k ) A balance of payments is a double entry system of record of all economic transaction between the residents of a country and rest of the world carried out in a specific period of time . This Photo by Unknown Author is licensed under CC BY-SA

4. BALANCE OF TRADE AND BALANCE OF PAYMENT The balance of trade is a narrow Term it takes into account only merchandise exports and imports, consider only exports and imports of visible items. The balance of payments takes into account the export and import both the visible and invisible items. Ex: consumer durables, technical equipment, and banking, insurance services , tourism, transportation, etc….

5. COMPONENTS OF BALANCE OF PAYMENT CURRENT ACCOUNT. CAPITAL ACCOUNT. UNILATERAL PAYMENTS ACCOUNTS. OFFICIAL SETTLEMENTS ACCOUNTS.

6. CURRENT ACCOUNT Current A/C includes both visible and invisible exports and imports Debit current a/c includes merchandise imports and invisible imports.(ex: goods and tourism.) Credit current a/c includes merchandise exports. Most of the transactions are on credit basis

7. CAPITAL ACCOUNT C A, is divided into 3 parts Private capital-( long term and short term capital.) Banking capital Official capital Capital account basically consists of credits and debits ,credits include foreign long term investment in the home country. Debit side of capital account includes long term Investments in foreign countries.

8. UNILATERAL TRANSFER AND OFFICIAL SETTLEMENTS ACCOUNTS Unilateral transfer accounts : giving the gifts these includes government grants ,remittances, disaster relief etc……. ex: India gave grant to UGANDA in 1998. Official settlements accounts : official settlements account represent official sales of foreign currencies and other reserve to foreign countries or official purchase of foreign currencies or other reserves from foreign countries.

9. Total exports ,total imports and balance of payment of selected countries in 2012 (billion dollars) Country Merchandise exports Services exports Total Imports Services Imports ₹ BOP China 2049 190 2239 1818 280 2098 +141 United States 1549 621 2167 2236 411 2647 -480 Germany 1407 257 1664 1167 293 1460 +204 Japan 799 142 942 886 175 1061 -119

10. DISEQUILIBRIUM IN BALANCE OF PAYMENT DEVELOPMENT DISEQUILIBRIUM CYCLICAL DISEQUILIBRIUM SECULAR DISEQUILIBRIUM STRUCTURAL DISEQUILIBRIUM.

11. CONCLUSION The balance of payment of a country reveals its financial and economic status, a BOP statement can be used as an indicator to determine whether the country currency value is appreciating or depreciating . The balance of payment statement helps the governments to decide on fiscal and trade policies.

12. BIBLIOGRAPY Information Retrieved from International Business (Text & cases) Written by – P. subba Rao