BALANCE OF PAYMENTS

 BALANCE OF PAYMENTS
It is an account which shows the receipts and payments of a country with rest of the world.
Structure of Balance of Payment
Current Account
 All exports and imports of goods and services
 Investment income like profits, interest etc
 Transfer payments like gifts, grants etc
Capital Account
 It include all types of short term and long term international movements of capital.
Financial Account
It deals with all financial transactions like port folio investment, foreign direct investment etc
 Policies to reduce Balance of Payment Deficit / Measures to improve Balance of Payment of a country.
 Devaluation: Devaluation means decrease in the value of currency by the government.
Devaluation make export cheaper and import expensive
It cause to increase in exports and decrease in imports.
 Import Control/Protectionism: Protective measures will reduce imports and direct demand to home produced goods.
 Reducing Demand: Fiscal and monetary policy will reduce imports and increase exports.
 Other measures: Give awards to top exporters, give training in marketing.
 Capital inflows
 Encouraging exports by giving exports subsidies
 Discouraging imports by using import control