Balance of Payment on Current Account

This section emphasises on the balance of payment on current account. Balance of Payments (BOP) statistics methodically reviews the economic dealings of an economy with the rest of the World for a definite period. The Reserve Bank of India (RBI) is accountable for compilation and distribution of BOP data. BOP is approximately consistent with the strategies and rules contained in the BoP Manual of the International Monetary Fund.

Balance of payment (BOP) comprises current account, capital account, errors and omissions and changes in foreign exchange reserves. Below current account of the BOP, dealings are categorised into merchandise (exports and imports) and invisibles. Invisible transactions are further categorised into three categories, namely:

·      Income

·      Services–travel, transportation, insurance, Government not included elsewhere (GNIE) and miscellaneous (such as, communication, construction, financial, software, news agency, royalties, management and business services)

·      Transfers (grants, gifts, remittances, etc.) which do not have any quid pro quo

Under the Capital Account, capital influxes can be categorised by instrument (debt or equity) and maturity (short or long-term). The main workings of the capital account comprise foreign investment, loans and banking capital. Foreign investment, comprising Foreign Direct Investment (FDI) and Portfolio Investment consisting of Foreign Institutional Investors (FIIs) investment, American Depository Receipts/Global Depository Receipts (ADRs/GDRs) represents non-debt liabilities, although loans (external assistance, external commercial borrowings and trade credit) and banking capital, comprising non-resident Indian (NRI) deposits are debt liabilities.

The data on merchandise skill are offered from two sources namely:

(a)     From the Directorate General of Commercial Intelligence and Statistics (DGCI&S) on customs basis;

(b)     From RBI on payments (which includes both receipts and payments) basis.

The Daily Trade Return (DTR) is the main cause of recording spreads data at DGCI&S, while RBI trusts mainly on the R-return furnished by Authorised Dealers (ADs) to collect the exports and imports data. The data on merchandise exports in BOP are collected on the basis of info accessible from the DGCI&S, after correcting for time and exchange rate differences. The merchandise export data is documented on free on board (F.O.B.) basis. It may be renowned that export of software in physical form is captured by DGCI&S.

You must understand that the customs record data on imports on the base of the Bill of Entry ready for goods incoming in the customs area. The data on introductions under BOP figures are accumulated mainly on the basis of returns surrender to by Ads accompanied by information on the transactions not passing through the investment channel such as imports financed through credit taken abroad.

Imports under the BOP data are noted on the source of date of payment or date of disbursal of loans, which may vary suggestively from the recording of imports at the Customs end on the base of real influx of goods. Under the Capital Account, both equity and debt flows are enclosed. Debt flows include commercial borrowings, external assistance, short-term trade credits and Non-Resident Indian (NRI) deposits, whereas the equity flows include Foreign Direct Investment (FDI) and Portfolio Investment. At the moment, direct investment into the country by non- residents is spontaneously permissible in most divisions subject to certain sectorial upper limit on equity holdings.

It is important for you to note that the FDI within the recommended sectorial ceilings is spontaneously allowed under RBI automatic route, FDI in delimited activities and in extra of the prescribed sectorial ceilings needs prior Government support through the Secretariat for Industrial Assistance (SIA) and the Foreign Investment Promotion Board (FIPB). The non-resident FDI investors are also permitted to increase their stakes through procurement of shares. The collection investment involves the amount upraised by Indian corporate through Global Depositary Receipts (GDRs) or American Depositary Receipts (ADRs), investments in Indian stock markets by foreign institutional investors (FIIs) and extraordinary net worth individuals and offshore funds.

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