It is the usual experience of all developing economies to have serious difficulties In their balance of payments. This will he clear if we analyse the requirements of development and some of its consequences. The balance 01 payments has two aspects the import aspect and the export aspect. On the imports side. we easily see that in the initial stages of development; the import bill must rapidly mount up from year to year. The country which has chosen the road to rapid economic development must be prepared to face heavy imports. What is being attempted is the conversion of a predominantly agrarian economy into a highly industrialized economy within a reasonable span of time. For this purpose, the country needs machinery, equipment and industrial raw materials. It must also import technical know-how. All these things an under-developed country lacks ar«J for them it must rely on foreign countries. An under-developed country also lacks capital. It has, therefore, to borrow capital from abroad. The loans have to be repaid and it has to meet yearly liabilities arising out of interest payments. All these developments tilt the balance of payments against the developing economy.
Now let us see the export side. A developing country must build up. of course, an export surplus to pay for constantly pouring imports. But in the early .stages of development. it is unable to export much, It has yet to build up export industries. Most of the domestically produced materials are absorbed in the manufactures. Nor can it spare capital for investment abroad, because under-developed countries uffer from serious capital deficiency. The country is also not advanced enough to export services of anytype. Most of the goods and services produced at home .