1. Unit - 4
International Trade

2. Balance of Payment
The balance of payments is a consolidated account of the receipts and payments from and to other countries arising out of all economic transactions during the course of a year.
Balance of payments refers to the recording of all economic transactions of a given country with rest of the world. Each country has got to enter into economic transactions with other countries of the world. As a result of such transactions, it receives payments to other countries. Balance of Payments is a statement of accounts of these receipts and payments.

3. Definition According to Kindleberger
“The balance of payments of a country is a systematic record of all economic transactions between its residents and residents of foreign countries.”
According to Benham
“Balance of payments of a country is record of the monetary transactions over a period of time with the rest of the world”.

4. Features of Balance of Payments
Systematic Record
Fixed Period of Time
Comprehensiveness
Double entry System
Adjustment of Differences
All Items-Government and Non-Government.

5. Components of BOP Accounts
The Current Account
The Capital Account
Statistical Discrepancy Errors and Omi­ssions
The Official Reserve Account

6. Causes of unfavourable balance of payment of India
Import of Machinery
Import of War equipments
Price disequilibrium
Expenditure on Embassies
Foreign Competition
Increase in price of Crude Oil
Payments of interest on foreign Debts
Less growth in Exports
Gulf War
Disintegration of USSR

7. Measures to correct disequilibrium in the Balance of Payments
Promotion of Exports
Increase in Production
Trade Agreements
Encouragement to Foreign Investment
Attraction to Foreign Tourists
Devaluation of Indian Currency
Deflation
Restriction on Imports
Import Substitution