BALANCE OF PAYMENTS

Altitude Mode, there is hardly any country which is self-sufficient in the sense
that it produces all the goods aim services that it needs, Every country imports Iron other countries the goods that cannot he produced at all ill the country or can be produced only at higher cost than Ignacio supplies. Similarly, a country export to  other countries the commodities which those countries prefer  buy from abroad Rather than produce at horn. The balance of record of economic ‘ of the  if a country with ‘ period or The Record is so prepared as to provide McCain: and measure to the various  components of a country’s external economic  transactions. SIRIUS, the aim is top resent an account of all receipts and payments on account of goods exported, services rendered and capital received by residents of a country, and goods imported, services received and capital transferred by residents of the country. The main purpose of keeping these records is to inform government of the international economic position of the country and to help it in reaching decisions on monetary and fiscal policy on the one hand, and trade and payments questions on the other.

Balance of Payment Current Capital Accounts

The balance of payments on Cutter account instinct s items like imports and exports, expenses on travel. transportation, insurance, invcsuucnt income, etc. These relate to current transactions. The Capital Account, on the other hand, is made up of capital transactions. e.g. , borrowing and lending of capital, repayment of capital. sale ami purchase of securities and other assets to and from foreigners-individuals and governments. When both current and capital accounts arc taken, it is cal~d over-all balance of payments. It is the over-all balance of payments which must balance.  By way of illustration, we give on the next page India’s Balance of payments on Current Account and on Capital Account for the year’  in the The various items in the balance of payments (current account) are given below: (it The chief item is the international trade in commodities. Export of commodities to foreign countries adds to our foreign receipts, while imports add to the payments that we have to make to the foreigners. Till difference between the value of  mod it.'” exports and imports i~ known a   If exports exceed imports, the balance of trade is said to be favorable. and if imports exceed exports the balance of trade will he unfavorable. As we see Rum the following table, in 1979-80.

had all unfavorable balance of trade because our imports  exports. The commodity exports , and import entering the balance of trade arc also called  they arc recorded at the customs harrier of  III additional It) lite m pot and export of goods, we also import and export <en Ice .. Such services may be of various kinds meets have to he made or received, e.g  port charges, shipping freight. passenger fares. harbor and canal dues, commercial services (fees and commissions), financial services <broker’s fees. and services  connected with the tourist traffic and payment of interest  debt. As again t commodity or merchandise transactions, which arc these services arc called items of the balance of payments as they arc not recorded at the customs barriers, If we render more invisible services t(l the foreigners than they render to us. we shall surplus on invisible account.Previously, India used to have a deficit on invisible  account as our payment on this account exceeded our receipts. India had to pay for the services of British officers working in India. their salaries, pensions and gratuities, shipping charges fur use of foreign ships, bank charges for use of the foreign banking services, etc. However, in recent years. India is having a surplus on invisible account as the above table shows. This IS because now she renders more services to the foreigners than they render tu her and also because
of official duties and private rcmiuauccs from the foreign countries sent to India.