3. Balance of Payments

Balance of Payments (BoP) of a country is a systematic record of all economic transactions between the residents of one country and the rest of the world during a given period of time. It summarizes all transactions that a country's individuals, companies and government bodies complete with individuals, companies and government bodies outside the country. These transactions consist of imports and exports of goods, services and capital, as well as transfer payments such as foreign aid and remittances.

3.1. Components of Balance of Payments 3.1.1. Balance of Current Account Balance of Current Account = Balance of Trade + Balance of Invisibles + Balance of Transfers BoT = Export of goods – Import of goods 3.1.2. Balance of Capital Account o Rupee Convertibility Negatives 3.2. Balance of Payments Disequilibrium a. Causes of Adverse BoP b. Measures to correct disequilibrium in the BoP ♤ Policies focusing on FDI increase.3.3. Indian Balance of Payments Crisis (1991)