,12

BALANCE OF PAYMENTS

~'E Of =A~1=NTS
,. :: :.A"1C€ := -'=,l· D=
,Y ~...=. ~s cc eA~ ~C1= oc =AW. !=~"-s
1

~ if-~ S ! ',C ACCOU;V,CQA- NG I i::MS

~= oc:
::----- -- ----------=.:..:..:_______
,,, ~ (EFi.CTT ,..,S=':;.., - 2::; J ~ "1 8!.tANC:c PAYMENTS

~ ~ BA ...A CE OF PAY E ITS

----------------
',,, ,.... r::r~' ~ ~ ~ ~ record of ci'1e .:ransactions thaI take place between the country and
.,,~ ~ tr~ : .d au.rm~ 2 giver. period oi dme. This record is termed as the country's
.., ; fa. ;or,r ~ ts (WP' · Balance of Payment is an accounting statement that provides a
~ rta>rd of" all the ewnomi.c transactions, betuJeen Residents of a country and the
_,Afr~ ;cortd, in a gfrer. perdld of time.

11'•a6'111f1J8/Ystalement in which al. the 'Economic Transactions' between 'Residents' and rest
•"""'1 are recorded during a partk:ua:r pedod o~ time (usually, one year).

'-ma a .,: try indude ir dividuals, firms and government agencies. Huwever, residents
, :.id"' Dfplm-; a:cic staff, foreign military personnel, tourists, migratory workers and
JfSo! f 1eigr ro'.apani€s, even mough iliey work and operate \\ithin the domestic territory

tran~tiuns refer to those transaaions wllich involve transfer of the title or oumership of
, terVU:es, money and assets. Tney are broadly ca :egorised as under:
These h1dude all types of ?hysical goods which are exported and imported.
l ~ are caJJed '"isible ire-ms' as they are made of some matter or material and can be
~, wudied and IIi easured. Tne movement oi such items is open and can be verified by
w tom officials.
InviSJble items of trade refer to all types of services like shipping, banking,
"ance etc which are uiven and received. Ti.'1ese are called invisible items as thev can not
, ~ J

:an, felt, touched or measured.

l Uru1.ateral transfers include gifts, personal remittances and other
12.1
 Inf
12.2
for rcpa
\m1•-wny l1i111~actio11 /. Since these transactions do not involve anr claim
tlwy ar~ ,lbo known ,1c; 1111rcq11ited transfers. th
-l. l Capital transforc; relate to capital receipts < rough borrowings or
ase of ,1ssets).
of as~ets) and capital payments (through capital repayments or purch
• .
St t cture of 1:i nee of Pay, 1er c; mg the transa
B.1l.1nct.' of p.1yments accounting uses the 'Double EntnJ Svstem for record
nt also has two sid
with the n.'st of the world . Like a typical business account, BOP accou
~ A]] inflows or sources of foreign exchange are record
ed on the credit si
side.
.. All outflows or uses of foreign exchange are recorded on debit
is prepared as per do
In the accounting sense, BOP is always balanced like Trial Balance as it
It means, Bop can
entn system. However, in economic se11se, BOP need not be always equal.
pa
·' BOP 1s balanced when receipts of foreign exchange are equal to
of foreign exchange.
BOP is in surplus when receipts of foreign exchange are more than payrn
of foreign exchange.
ents
BOP is in deficit when receipts of foreign exchange are less than paym
foreign exchange.

n residents of a country and

1. BOP is a systematic record of all economic transactions betwee
rest of the world.
ral transfers and capital
2. It includes transactions relating to visible items, invisible items, unilate
transfers.
3. It is a flow concept as it is related to a given period of time.
ge are recorded on the
4. It is prepared as per Double Entry System. Inflows of foreign exchan
credit side and outflows on the debit side.

12.2 ,eANING '"*'- ,..."T" ,..•~-

exports and import;;;
Balance of trade (BOT) refers to difference between the amounts of 0
visible items (goods).

imports are entered as

Exports are entered as credit (positive) items in the BOP account, while
a crucial role in deciding
debit (negative) items. BOT is just a part of BOP account and plays
the overall situation of BOP of a country. BOT is also known as 'Balan
ce of Visible Trade' or 'Trade
1.
Balance'.
Baiance c·- r, ·'. n -
export of goods is always
The balance of trade need not balance itself, i.e., it is not necessary that
ive) or deficit (negative).
equal to import of goods. Balance on BOT can also be surplus (posit
rts, then the balance of
• Surplus BOT: If a country exports more goods than what it impo
the country.
trade is said to be in surplus, i.e., balance of trade is 'favourable' for
the country is said to
• Deficit BOT: If import of goods exceeds the export of goods, then
ry.
have a deficit BOT, i.e., balance of trade is 'unfavourable' for the count
 f 1 1, ,,,,f ,~ 11 f I 111 I, '/ , ', ' ,, L111 I 11' 1, ~/ f/1 111 ,, ff i ,J1 I J!.,( ,j H d '
I 11 (1lfil/lll "" 1111110111111,11,y J,,,j,if,, ,,,,/,Hyd) •111• A,,..J;
1' Ill 11t,f fj I f 11 1
(fll I I I •1
II y II
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,,,,,,
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r,1rt ,fJ:'Jl't1';U,Jt
1
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I 1 I' I 'I 'I ( :' J I

{
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(j /I Jn 1 1

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I
urrml momnl rt'/l'f t,, un u" 1,1.1nl whir Jr r"' ,Jrtl,s u/1 fJw trnn u, tionrs r,,[uJln:,: lo ,,xport and
p(lr/ nf r,011tl und 11•rtJJt e i 1.md undut,,rtlf lr11n-4,,r,, durln7, u 7,ion, ,,erfod of Ume. r :r:cnl
t I t " H ,, n, (•lpt tffld f'''i" , 1 t) wl.atn ;.~ tn all th< tran , , Um of vi~1bl<• ,te1n,;,
,I ,t , nd unil, 1' n.11 tr,u }f,•r 1

t, p<rr,nt,of( Urfl1tfqomlirs•:
A major parl of
ti, n , fon•1gn tr,,d, i m tJ ,. forr, ,,f, /,">rt and irnpmt of j~ood1; (vil,iblc itenu,).
f" ,. t for HllJ,,,rt ,,f ,~(11 ,,J , , wntu•n o-n lru , ~~Hvc ,Ht• (d,•lJ1t iterw,) and receipt from
:r
rrt , J , 'llf " " tt ,. y,1t1V£ .i f, ,, n•iht 1t.n'n ) l~alanu: of Im" r v,r,ihl<' export1, and imports
r.n ma balatul' of tmdr /rJr trad,, !1alam t!J ~
1r. cl, lhl rrco cnn t,,
,,f tw1, 11/f,'J',
It r()for., t1.1 ft,,, ,.zr,,,,, •, 1Jf ti 11 f.1,,ym 1JrJW fr,r Imports r,f vwlf;fa /trJm"; <J'lf';f thq value
fpt (,( oxp(,rl r,f vi' /Ur, JU,m',
It mloi to tho, /f,fi'. of tfW rr;r;r;,/ptc of f.J/f)f.1rtJJ of 1,afbfu /toms ow1r the valu~
f /J yrr, n for lrt fVJrl r..1f 'l1r;lf;fo 11nm,
J
12.4
I.1rgt• van.l'ly of non
2 t: • ., ....~ -~ 1mpt,rt '-' q
~)t ~, IH It ·mr Iuul'S
J
,1

purc-h.1sed b) tlw ll'~idL•nts of <1 coun

~en·•cc::, ll-.no\\'n as iiwic;ible items) sold ,rnd
eil lwr 1l'Cl'h cd or m.idl' lo l lw other co
and Tom tht~ rl'..;t ot the " t)r!d. Pavml'nts arc
lh of three kinds: (,1) Shipping, (b)
for u~e of thc:-;e -;ervices. Sen ice; are ~t'ner.1
and lC) Insurance Payme11t~Jor these ~~niite:-
arc rccordl'd 011 the llt'g,11 Ii'(' side a11d
the positipc s1,1t 1
3. ln, I, ·ril ) I nre~ .... ~rrr tn'll t,1 I l'
remittances and other '011,·-way' tr
tran~fers include gifts, donations, personal
ts, "hi ch takt' placc without any s
These refer to those receipts and pa) men
rest of the world 1s ~hown on the ci
return. Receipt of urulateral transfers from
on the debit side.
and unilateral transfers to rest of the world
~ •• , ,l 1 1 1 1 1r It includes investment income
4. Income rf>ri>int, •• ,
form of interest, rent and profits.
(nrrent ACL _ . .hr· e \ ! In "(11111.'
d
sactions of goods and services which affe
Current Account records al1 the actual tran in
. So, it shows the net income generated
income, output and employment of a countr1
foreign sector.
Duie h:::1 ir, h4'.lhvcen Bal
,f Trade arr!
)n('j' .'

Current Account
~ asis Balance of Trade {BOT)
Balance of trade includes only visible Current Account records both visible
Components and invisible items.
items.
It is a wider concept and it includes
Scope It is a narrow concept as it is only a part
BOT.
of current account.

B.'.ll :mr ci on CurrenT

curr ent account, rece ipts from exp ort of goo ds, services and unilateral receipts are entered
In the ts
import of goods, services and unilateral paymen
as credit or positive items and payments for
value of credit and debit balances is the balance
are entered as debit or negative items. The net
on current account.
n credit items are more than debit items. It
• Current Account Surplus (CAS) arises whe
arises when the value of exports of goods
indicates net inflow of foreign exchange. CAS
of goods and services. CAS signifies that
and services is more than the value of imports
the nation is a lender to the rest of the world. n
Cur rent Accoun t Deficit (CA D) arises whe n debit items are more than credit items, i.e. whe
•
unt fall short of foreign exchange payments,
foreign exchange receipts in the current acco s
s net outflow of foreign exchange. CAD arise
it leads to current account deficit. It indicate good s
ices is less than the value of imports of
when the value of exports of goods and serv
is a borrower from test of the world.
and services. CAD signifies that the nation
Components o: C,u;,br, '. ;. ~. It

Debit Items Net Credit (Credit-Debit)

I Credit Items
Imports of goods Net exports of goods
fT. Visible Trade
(Balance of trade)
Exports of good
Imports of services Net Exports of Services
Invisible Trade
Exports of Services
- - ~ - j __ _
l
- - - -
 nt

HA

lll dt
It llh
m, ll t
\ t ,l ,-..1-t ,) , ... I\' lh \ hl
h 11h 1 \\ llh ~s 1111m ,1b1,-1,I h, \ t l l t Cl\ l 111
tht
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t
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1d
1,1 .ih i•1n,1h'-.,\t11 1nd
'in t• 1" nl nt ltnd111 .1h10
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ll', ni. ft'l i ,1, 1h•~,1
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1
nd rq ',l'
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, 1' 1I l',l,1 It' m Ind,., , •t,
tlw " Id m sh.111
n t",tnwnt, b, 1t·,t diPl
th, • p,i,1t1, ,. {, rl·,i1t) ... ,dl• .,
... th1•, bn ng
1 m .1l,11).1d ,111.• 11-. , 1 1-rt,•,I ,,n
~1 h m , t•-.tn1,·nt, ll\
n fort'1hn 1.''\1. h,m ~t ' ll' .1b1 0,1d l'l,
c, h kn t-. 111 ... 1\.111 .... , ,ft , ir,'tg n , 1)1np.1111t ,, ll'.ti ,,... 1,1
Im t ,tn wn t, t,, Ind i.11 1 1 , ,l'- th,•, l1-.11i ftl
1 r1 1,hi ,lll ' 11'\ , 1 rd,·,i llll th, •
111·~~.111, ,. (dl'l 1 1t ) ... ,,1,
-..ud1 in , l', tn wn t, h .1l
1

.
ou ttlo \\ ot fPr \•1gn l''\ th, llh
~t• . .
(FO i) It 10IP 1~ to p111cll.1s1 of an n:;:,f'I, sui
g,,
'h that 1t ,•s d1mct
} Foregn Dmict lm- est mo nt 1 lnrtlrltng
er ow , tllc l Rs::it:>t Fo, ex 1mple, p1111 111s0 of I 111d 11m
control to tho purchas cll 111111 It doos not y1v(1 nri
y
es tm en t It rt.1tcrs to pur cll 8S t' of m .1:;St'I su It ols o
) Portfolio Inv plt, pll lclm se ot ::;lmros
t to tho purch,1::ier For ox,un
direct control over the asse
nal lnvestm~nt (FIi)
includes Fo rei gn lnst1tut1o

I's , ll I' I hl' Ii ll,l lll 1.1

1.t-.,ct,..
1lw I\ \I l'ign l'\ l h.111gl' I I ...., 'I'
1 lm ,llh in g
nl-.. \ l h,r ng ,• in 1,' ...\'n t'" ... ,., \ ,•s ,Is tlw
1-.1t,r-, (t 1, d1t) ,,d,
tlw u•n lr,1 I b,r
f tht' gm l'm nw nt lw ld in 111 .,,., ·,•., i.. 11, 01de d 011 tlu 11c
,l'tll1r lm, mlj 1,1 tlti · 11
>k d th. it
tern in Indi,1 ':- BOP. So flll l/ ,·d th,• m·_ ..:r1 t1,·,· (dd 11t ) .,,d,. It mu-.t ht• 1h
1,·1n1d 011
any,1dd1tio11 fti tlu , 1• re -.,'
l,'t' s , ...
.
11 ml .rnd 1hi t ' 11' "1'1 \ l's
tlw B( )i' ,llu
a · , • , ... , ·.., 1 'u) t\it .-d in
-

• : ' l •• ' .' ,t .ui, l'~ \\ ht'll \·i t,\1\l 1m:\tns ,)r(' mon.' th,m cn•dit itl'l11S, It ind 1
outfim, r,f -:.,ptll. <:at

.. aJ~ ~ .:m to c rrent accou t and cap tat account, there 1s one more element in BOP k
"Errors and Omissions' It s the ba ancmg item, which reflects the mab1//ty to record all ,~te~~~m
t'a:r1sac ons axurate!} a110

Credit Items Debit Items Net Credit (Credit-Debit)

◄
I. Borrowings and !endings Lendings to abroad Net Borrowings from abroad
to and from abroad
3orro ,\ '1QS ~rom abroad
2. Investments from abroad Investments to abroad Net investments from abroad
'1\estrrients from abroad
1

3 Change in Foreign Increases in foreign Net change in foreign exchange

Exchange Reserves exchange reserves reserves
Decreases in foreign
exchange reserves
Capital Receipts (1 + 2 + 3) Capital Payments Capital Account Balance

Balance on current account and balance on capital account are interrelated.

• A deficit in the current account must be settled by a surplus on the capital account.
• A surplus in the current account must be matched by a deficit on the capital account
D
Basis Current Account Capital Account
Influence on Current account transactions bring Capital transactions bring about
the economy a change in the current level of a a change in the capital stock of a
country's income. country.
Concept It is a flow concept as it includes all It is a stock concept as it includesall
items of flow nature. items expressing changes in stock.
· a~d
Components Current Account = Visible Trade + Capital Account = Borrowings st
Invisible Trade + Unilateral transfers !endings to and from abroad+ Inve ·
+ Income Receipts and payments. ments to and from abroad + Change
in Foreign Exchange Reserves
 12,7

AND ACCOMMOOA 1
ll',1'11kd 11\ lh,• li,d,11h,· ' ll ,,.,, l\ll'tlh lh I 1111111• I"" I 1t' '.,
' ' 111 / •'"
IIi,' I
111 111
"'·"
111
"'" ,\l\d \, 1 ''l\\llhhl11t111r, I 1,111s,n l11111•, / ,•/ 11 ,/1 111 • '''' I, of 11''

,, .. tft'/1I~ rc•f,'I t,, 11,.,._,. 111t,•111,1liC111,1/ ,·, ''"""'''' l1,111s11e 1,,,,,., 11•/1i, It t11k,• 11/,11 ,. ,/11,•

~011~'r',,,,,,111it '"''tivc sue/, '1~ 1I10 /tl 11I1 1\imh,,1ti,,,1. l lws,• 11t•111s ,Ill: ,tlsn k1111,," • 18
',,!,, '' •·
,r',,,.,,,... . .
(ll ,,11, .. ti,lll"•'l lHHh ,Ill' llll~l'}'l'l\d,•nt 111 tlw ~1.11,• 111 m)jl ,h l ll\1111 , ii ,, l1111•1g11
,11110 .., ,,kill~
111
,n, n,
,•.,lnwnt ... tn Ind,,\" 1th th,• ,1i111,1t 1'.11 11 g I'' 11111 , tllt'n s 111 h •' 11 •111 ..,' 11111111
,,, I 1,,11 I , 1I t lw l' \ HIil i I'\ " H( )jl :-;i Ill, l l 1\)1\ . A II I(I/ /(11//(1//s / / '" /s t/t / 1r111s I ,,k,· I 1/,1, I I 1/1 / ,, ,//, I II I I,.,II
I

"'l\11

,i1,1 a,, ()II"'"·

,r,
' curr1.•nt ,1ccnunl, nwrch,1nd1:-;1• t'\potls ,111d i11111wt:-; 111 gnrnls ,11t· ,111t111H>llllllts
(111 II\l
' ll tinn~.
1r,1ll"'• • •
thl' c,1pi t,11 ,Kl'lllt nt, n•1.'l'tpb ,llld n•p,l) nwnts ol ln11g-h'1 m lo,111•, h) I'' iv., ll · 111d" 1d 11,tl•,
011 I ,nonHlll~ I I,\11~,\l'I H)lb.
,1!1' ,lll (

or oeflclt In BOP: Autonomous items ,lm causa of BOP ,mb.-1/nnco (BOP ::;wplu~ 01 cJ01tc1t)
B()P account 1s in surplus when autonomous receipts are moro than the autonomous pnymonts
: (JOl'tS ,n deficit when autonomous receipts are loss than aiJtonomous pnymonts

odatrng It m
c1ati11g items rt'fl'r lo /1,e trans,icticms t/,a/ art' 11111/,•r/11kt'lt to cmicr ti,<' X"I' in tJ,,.
01111110
tnnce of payments, i.e. sucl, lrnusacticms ar,• 111tdt•rtak('1t to C<H1<'r ,frjicil or ~m-,,111:. iu
tonamous transactions. Th<.•st' items .Ht' ,,lso known ,ts 'lwlow tlw ti,w itl•1w.:.
:comrnodating lrt1nsact1ons arc compt'ns,11 ing <. ,1p1t,1l tr,tns,wt ilm"i wh id, ,1n· nw,111t to l'o11 l •ct
di,('quilibrium in autonomous i l<.•ms of b,11,mct' of p,1ynwnts. ii tlWl'l' is,, tit 111•11/
,mt dcf,ot in the BOP, then lhis d,ficil is st•tlll•d by ,-.1pit,1l inflow lrom ,1lm,,1d . '1lw so111 l l's
to med a ddicil in BOP, are: (i) Foreign l'Xl'ht1nge n•st't'Vl's; (ii) Bo1 rowings Imm IMI· oi
,gn m1J1wt,uy ,rnthorilies.

-nous Item V Accommodat1ng It m

Basis Autonomous Items Accommodating Items

Meaning Autonomous items refer to Accommodating items refor to the

those international economic transactions that are undortakon
transactions, which take place due to cover def 1cit or surplus tn
to some economic motive such as autonomous transactions.
profit maximisation.

Effect on BOP Autonomous transactions are Accommodating trnnst1ctions me

account independent of the state of BOP undertaken to maintain tho balance~
in BOP account.
account.
 \11t,,lh.' tlh )tl6 tHl lHH-l \5 th'lle
t::tl,e~ rl l \rc,,nHnodati11g
t:; t
tlonsactions
"'O ltal account
take
~ ~'~ , 'H bi ·th ,'lll rel ,t ijl ill capllal µlam~ 0111 ~ i)ll <~ P '
~-\ \)Unts f
'11(,~e itr,m, ~,·{~ ats,, •,m,,, ,1 m; niuso ito1~1s ?re nt;o known a
,. <:' ~uh~ 1ltlC htlH8
{h~,'\ ;..,, ,1 , 'holow tile l111e 1toms ,
~ \ ' " • , ' ,, I' ,
•,' ' , , \\, \ ~ ~ • ' '\ \ \ ,H'll\\f lh, ' •t'\l'-1..
,~~t-~ . , ~l'.i\\ ...., ,~,\i ,m tlh'i'}~l\h'iplc$i~\t\k\lH&l,\.;s\\lt\
~~'' $h..
, ,\~~, i thh,,~h ..-.,\n,\1h,nhm~h\1H~,h Hdm~ (~ ',,,·,·cf'k1l 1,v the u)11e~ptJndmg ::,urpJus or
.._,~h.:111 \ 1n ~kfidt~s

~ ~~-',~,\\ 'n"n,"t\Ut\~ thH\~.h~tion by H\dnc1.,1 , ,\\tlh,,nh

"" "?t t01$ r't ILIB illtM) IN THt BAL AN~.: OF PAYMENTS
"h,'1" ~ Ht ·'t',\~,H :\ ,\, ~}h' ?Ml.Hh'c,l 1-.n rncnH hJ hl' m cqui~ihriun~ du1.'ii~g c1 given
i,
c \',\ A} }~ ..:,1uihbi 1~u n n' :~" \' l'! ,l '-, 'lttll 111.n h' t'ttlwl' in thl' kH'm nl def1c1t or ,ls a surpl
\ $ ,~ .' i ~ U\ ,~. . ) } ' ,t ,,,~ l hli ~,,~c Hlih' h ,>l .1 i'l\lbll'tn. 1h,,, t'\ t't ,1 dl•lidt 1..1llt'n (Te.1tcs diffi
.'!',~ ' ,' '~ . ,'l th,\ ,',\)lh)nl\ \
B.t'";. .. t , ... f-._.l,n:.¥. t.,fs,,1ymr:,Hs ,il\'cwur ,lfi:.-cs wltc'll total illftou•s 01111cco1111t of twtono
:1""... ~ :~ti'-n .~ ,n~ lc$S fluu: tnt,il cmtJ1ows 011 ,h·rmmt ot' ,t1d1 f't'i111sactio11". On the other h
,\'•·' ntt,,,~,Hhh\'\HlHI lll ,1uhm01nous h'.1n~.lt'ltl't1s l'\l'Ct'd h1t,1l outtlo" "t.111,l(C\)untof such
rt,:m,~1:1~,' H~ th,'n th ..'t't' i~ ~urpffls iu h,ltw<'c' oj paym<' ,;;~ ,h ,01111 t.

e.1"2 :;;1n,:s:m--------- ---------------.. .

~ ' t ~ns.~t! .m~ ,'amc.~d on hy m,'t1eUu v .11Hl1l,, 1t1os ot ~1 countrv, which causes changes in official
tt:."S-:'1Vc-~ <ltt' tt'!lHc.ld 3$ Offt{'inl F·~l)s0n o 1rans.ictions ·\utonomous I ecoipts and autonomous
,)Jjlitt~ ~ g~c risf) t<' t)fthm dtlfiGit or surplus cm 8,ll,mco ot Pavments. Thr Central Bunk may
~~ l~" 0 tie Cd b~ :

Ri.:tltiting re~ervo~ of r<m~l gn cummcv.

s~rn,\ ngs fmm nmnotary ,mthoritie~ 1,kt:) ll\,1F.
Tht-' c~ u,a Bank m,,) use surplus to purc11use foreign secwitios. foreign currency, gold, etc.
\\h d1 o~'l} result m incre-,1~m in mso, vrs of tho nation.

f;.1r-Q~. ~s, De11~1 (D:~equillhrium) in:"(.."'•"'' n~fer Pmver Booster Section.

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(MCQ QUEST 0
(MRQ SE CUES O S

/nt/11 (11/111w11 1110W",llon~, I/JM• mr1y hr one or more than one correct answer. You have to mark all the correct answers.

1, W/1<> rn1t ol lllo lollow1ng IS included in "Residents" in BOP transactions?

I lun~, Foreign military personnel
( iovo1 ll1t1P111 ngoncios Individuals
2, /111 acco1m1111q :;;tatomont that provides a systematic record of all the economic transactions. between
r, r.1cla111t, ol i1 country and the rest of the world is - - - - -
l~.1/.111co of P.iyrnonts (t Balance of Trade
, G<JVtJr n1110nt Budget (c None of these
3. Pnla11c(1 of Payments is a ___ concept.
Stt,rk (t Flow
fr Neither (a) nor (b)
Uotll (tl) und (b)
4. Inf/ow ot towign exchange is recorded on the _ _ side.
C1 f'fht Debit
E1tller (cl) or (b) 1r Neither (a) nor (b)
5. Wh€ln receipts of foreign exchange are more than payments of foreign exchange, BOP is:
6,1lanced Surplus
Defir1t (c None of these

6. "'l.Jrnlateml Transfers·· are also known as:

(t One-way Transfers
Bifateml Transfers
( Neither (a) nor (b)
UnrPqttited Transfers
7, Ba anee on 'Balance of Trade' can be:
b Balanced
S, rp us
Either (a) or (b) or (c)
Oefi-- t
ch nf the foUowing is a component of Balance of Payment?
Current Account Capital Account
Real Account
N..:: na Account
 12.18 ' al ry

9. Export and import ot goods is also known as

Indivisible Trade Visible Trade
One-sided transactions r Unrequited transfers
10. refers to the difference between exports and imports of visible items.
• ' Balance of Payments Balance of Trade
Both (a) and (b) Neither (a) nor (b)
11. Autonomous transactions take place on
Real Account Capital Account
Current Account None of these
12. _ _ _ _ transactions are undertaken to cover the deficit or surplus in autonomous transaction$..
,,. Current Account Current Account
Accommodating None of these
13. - - - - isthe difference between value of goods sold to the rest of the world and value of g
imported from rest of the world.
Balance of payment Balance of trade
' Balance of current account Balance of capital account
14. Gifts and remittances to abroad are recorded on the:
Credit side of Current Account . . Debit side of Capital Account
Debit side of Current Account Credit side of Capital Account
15. Export of machinery is recorded on the:
- Debit side of Current Account Credit side of Current Account
, Credit side of Capital Account I -, Debit side of Capital Account

16. Surplus in BOP arises when:

Autonomous Payments > Autonomous Receipts
Accommodating Receipts > Accommodating Payments
t, Accommodating Payments> Accommodating Receipts
Autonomous Receipts > Autonomous Payments
17. Balance of Trade is also known as:
P., Balance of Visible Trade Balance of Payments
Trade Balance None of these
18. 'Import of Machinery' is recorded in the _ _ Account and 'Borrowings from abroad' is recorded in
the Account.
Current, Capital 1.J, Capital, Current

Capital, Capital '~ Current, Current

19. Foreign exchange transactions dependent on other foreign exchange transactions are called.
v'v:. J• .'Oi6}
Current Account Transactions (.... ' Capital Account Transactions
Autonomous Transactions (l) Accommodating Transaction
20. Foreign exchange transactions which are independent of other transactions in the Balance of Payments
Account are called: ., J - :: /"

Current Transactions Capital Transactions

Autonomous Transactions Accommodating Transactions
21 . Balance of Payments 'deficit' is the excess of:
' Current account payments over current account receipts.
Capital account payments over capital account receipts.
 1Z 10
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S 'fh Lend111n tor oroign Cow~lllos I BorrowI119 lrorn f ororgn Countnos
1:::xport i'nd Import ot lnv1slblo lloms 1r1, f orolqn lnvo~,lmont•,

: b:tlance o1 tr rld0 18 showing n ctoficit of { 300 croros and valuo of exports Is ~ 1,200 crores, then th e
,6 1 of 1111 ports would be
\l!'lllle
' ~ JOO crores {t ~ 1 ,200 croro5
, t 1500 crores ('ll { 900 crores
oeticit or surplus in Balance of Payment arises due to Transactions
1
2 l AUtonomous (ti) Accommodating
1
current Account (d) Capital Account

_current AccounthDefrclt (C~D) _mehans:

28 foreign exc ange receipts in t e current account fall short of foreign exchange payments
Debit items are more than credit items
c) Both (a) and (b)
I
d Credit items are more than debit items
• According to the following data, Balance of Trade would be:
29
Total exports of merchandise t 1,000 crore
Total imports of merchandise t 1 ,200 crore
1

1 1) Total exports of invisibles t 200 crore

vl Total imports of invisibles t 100 crore
c1\ Surplus of~ 100 crore (t l Deficit of~ 100 crore
~ Surplus oft 200 crore (<I Deficit of~ 200 crore
30. Current Account of BOP records:
a Exports and Import of Goods (t I Exports and Import of Services
c) Unilateral transfers from and to foreigners 'c All of these
31. The net value of balance of visible trade, invisible trade and of unilateral transfers is:
a Balance of Current Account t l Balance of Capital Account
c Balance of Trade (d) Balance of Payments
 ,r ym nt
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All f th
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td f

1 ( l \ ) (d) 2 ( ) 3 (b) 4 (a) 5 (b) 8 (b) ( ) 7 (d) 8 ( ) (b) 9 (b) 10 (b t

12 ( ), 13 (b) 14 ( ) 15 (b) 18 (d) 17 ( ) ( ) 18 ( ) 19 (d) 20 ( ) 21
23 (d) 24 (d) 25 ( ) 28 ( ) 27 ( ) 28 ( ) 29 (d) 30 (d) 31 (a) 31

N A N U Tl N (ARQJ
1 A d th following tatements As ertlon (A) and Rea on (A) Choo e on
1v n b low
Assertion (A): Balance of Trade Includes only Merchand1 e Tran action
Reason (R): Unfavourable Balance of Payments can be met out of favourable Balance of