Balance of Payment:-
The term balance of payments or balance of payments of a country refers to the systematic record of all the International transactions for a given financial year. In other words, the balance of payments of a country is the systematic record of all transactions in goods, services and assets between the residents of a country and the residents of foreign country during a financial year.
Classification of Economic Transactions in BOP :-
Economic transactions in balance of payments are broadly categorized as given below -
a. Visible Items :
This category include all types of physical goods that are exported and imported during a financial period.
b. Invisible Items:
The invisible items refers to all types of services given and received during a financial year.
c. Unilateral Transfers:
Unilateral transfers refers to those transactions between countries which does not involves payment like government transfer which includes grants, gifts and aids.
d. Capital Transfers:
This category includes both capital receipts and capital payments like borrowings, capital repayments, sales of assets etc.
Components of BOP :-
Balance of payments accounts in general are broadly classified under the following heads -
a. Current Account
b. Capital Account
Current Account :
Current account refers to the account of BOP which is a systematic records of imports and exports of goods and services and unilateral transfers.
Capital Account:
Capital account refers to the account of BOP which is a systematic records of all transactions between the domestic country and foreign countries and which causes a change in the assets or liability of the country.
Items of Current Account:-
The main items of current account are listed below:
a. Export and import of Visible Items or Goods.
b. Export and imports of Invisible Items or Non-Materials Goods or Services.
c. Unilateral Transfers.
Items of Capital Account:-
The main items of capital account are listed below:
a. Direct Investment.
b. Portfolio Investment.
c. Loans.
d. Banking Capital Transactions.
Balance of Trade :-
Balance of trade refers to the the net difference of the Import and export of all visible items between the residents of a country and residents of the foreign countries during a given period of time. When the export of visible goods are greater than the imports of visible goods we have a surplus balance of trade. On the contrary, when the exports of visible goods are less than the imports of visible goods we have a deficit balance of trade.
Autonomous Items of BOP;-
Autonomous items of the balance of payment refers to those items of balance of payment which is related to such international economic transaction as are determined by the motive of profit maximisation and not to maintain equilibrium in balance of payments. These items are known as the first items in the balance of payment as they are recorded as a first items before calculating deficit or surplus in balance of payment ..
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