Course Title Internatioal Trade and Balance of Payment

Course Title Internatioal Trade and Balance of Payment, ECO - 3 Course Instructure: Dr. R. K. Kumbhar Unit - 4 ● What is Balance of Payments? Balance of payments refer to all economic transactions between domestic a foreign residents over a stipulated period generally one year. What is balance of trade? Balance of trade refers to the difference between physical imports and expo i. e. visible items only for a period say, a year. Visible items are those which are physically exported and imported, l merchandise, gold, silver and other commodities. During a given period of tim exports and imports may be exactly equal in which case, the balance of trade said to be balanced. If the value of exports of a country exceeds the value imports, the country is said to have an , when the value of imports coming to a country is greater than the value exports, the balance of trade is said to be unfavourable.

How balance of payment is different from balance of trade? The balance of payment is broader than the balance of trade as it includes only visible items but also invisible items. Hence, the balance of payme presents a better picture of a country's economic and financial transactions w the rest of world than the balance of trade. Balance of payment is comprehensive and systematic record of all economic transactions between residents of a country and the rest of the world. What is Current Account? The balance of payment on current account record the current position of country in the transfer of goods, servicas, and merchandise as well as invisi items, donations, unilateral transfers, etc. Current account !s like an inco and expenditure account, Surplus or deficit in current account is transferred capital account which is like a balance sheet and thus balances itself in histo sense,

What is Capital Account? Balance of payments on capital account shows the country's financial posit in the international scenario, the extant of accumulated foreign exchan reserves, foreign assets and liabilities and the impact of current transactions international financial positions. The changes in foreign exchange reserv arising out of current account transactions are included in the capital accoun order to find out the exact foreign exchange reserve. The capital acco provides relief to deteriorating balance of payment positions. Its favoura effect depends upon the availability of net capital transfers, i. e. , gross inflow capital minus Payment by way of amortisation. In short, capital account refle changes in foreign assets and liabilities of the country and affects its credito debitor position. Net changes in cumnt account are reflected by corresponding opposite change in the capital account, changing the fore assets and liabilities position of the country.

What is Balance of payments Disequilibrium? A nation's balance of payment is said to be in equilibrium when it is neith drawing upon its international reserves to make excess payments n accumulating such reserves as a result of its receipts. In other words, when country is not able to pay for its imports of goods and services from its exp earnings, on accumulating reserves year after year, a disequilibrium in balan of payments sets in. Policy initiatives are needed to restore equilibrium. A disequilibrium in balance of payment may be short term or long term in natu Short term disequilibrium, arises largely on account of cyclical factors. A cr failure leading to a sudden fall in export earnings may create a shortfall a consequently a disequilibrium. Long term or structural disequilibrium arises on account of long term strdctu changes in the economy. Fall in demand of export products due technological changes may bring about a decline in export proceeds. Decline demand prices for natural rubbcr on account of development of synthet may be cited as an example. Such a situation call be remedied only

What is deficit or surplus balance o payments The difference between aggregate debit and credits is called balance. In ca debits exceed credit, balance is negative or deficit, when the credits exce debits, the balance is positive or surplus. Obviously, the term, deficits or surp cannot refer to the entire BOP but subset of accounts included in BOP. Where value of exports exceeds imports, the situation is referred as tra surplus or surplus on trade account. Excess of imports over exports results trade deficit on trade account.

Process of BOP adjustment ● The Classical Approach ● The Elasticity Approach ● The Keynesian Approach ● The Moneytary Approach

Questions 1. What is Balance of Paymens? 2. What is Balance of Trade? 3. How balance of payment is different from balance o trade? 4. What is Current Account? 5. What is Capital Account? 6. What is balance of payment disequilibrium? 7. What is deficit/surplus balance of payment? 8. Discuss different process Bo. P adjustment.

References ● ● Egyankosh materials This is to certify that the PPT is prepared me b closely refering to the egyankosh materials an will be used here only for knowledge creation and not for commercial purpose. ● Dr. R. K. Kumbhar

Assignments Discuss the impacts of LPG and WTO in th 'Indigineous tradional knowledge' with regards t medicine. Do you think - if India would not hav accepted the LPG policy and WTO's treaty the CORONA pandemic would have been lesser impact in the world?