FEATURES OF BOP
●It is a systematic record of all economic transactions between one country
and the rest of the world.
●It includes all transactions, visible as well as invisible.
●It relates to a period of time. Generally, it is an annual statement.
●It adopts a double-entry book-keeping system. It has two sides: credit side
and debit side. Receipts are recorded on the credit side and payments on
the debit side.
IMPORTANCE / SIGNIFICANCE OF BOP
(a) BOP records all the transactions that create demand for and supply of a
currency.
(b) Judge economic and financial status of a country in the short-term
(c) BOP may confirm trend in economy’s international trade and exchange rate of
the currency. This may also indicate change or reversal in the trend.
(d)This may indicate policy shift of the monetary authority (RBI) of the country.
(e) A country’s Balance of Payments reveals various aspects of a country’s
international economic position. It presents the international financial position of
the country. If the economy needs support in the form of imports, the government
can prepare suitable policies to switch the funds and technology imported to the
critical sectors of the economy that can constrain potential growth.
(f) It helps the government in taking decisions on monetary and fiscal policies on
the one hand, and on external trade and payments issues on the other. It analyses
the business transactions of any economy into exports and imports of goods and
services for an exacting financial year. Here, the government can recognize the
areas that have the possible for export-oriented growth and can prepare policies
supporting those domestic industries.
(g) In the case of a developing country, the balance of payments shows the extent
of dependence of the country’s economic development on the financial assistance
by the developed countries. The government can also use the indications from
