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Trends and Challenges of India’s Balance of Payments

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  • Sreenilayam, Dr Jomon Mathew

Abstract

Balance of Payments (BoP), being a record of the monetary transactions over a period with the rest of the world, reflects all payments and liabilities to foreigners and all payments and obligations received from foreigners. In this sense, the balance of payments is one of the major indicators of a country's status in international trade. BoP accounting serves to highlight a country's competitive strengths and weaknesses and helps in achieving balanced economic-growth. It can significantly affect the economic policies of a government and the economy itself. Therefore, every country strives to a have a favorable balance of payments and maintains its long run sustainability. India’s balance of payment position was quite unfavorable during the time of country’s entry into liberalized trade regime. Two decades of economic reforms and free trade opened several opportunities that, of course, reflected in the balance of payments performance of the country. This paper, therefore, attempts to evaluate the trends and emerging challenges of India’s Balance of Payments. The discussion is broadly classified into four parts viz. i) India’s balance of payments picture since 1991, ii) emerging role of invisibles and software services in balance of payments iii) unhealthy trends in FDI and iv) the vulnerability and challenges ahead.

Suggested Citation

  • Sreenilayam, Dr Jomon Mathew, 2013. "Trends and Challenges of India’s Balance of Payments," MPRA Paper 51387, University Library of Munich, Germany, revised 05 Sep 2013.
  • Handle: RePEc:pra:mprapa:51387
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    File URL: https://mpra.ub.uni-muenchen.de/51387/1/MPRA_paper_51387.pdf
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    References listed on IDEAS

    as
    1. Rajiv Kumar & Mathew Joseph & Dony Alex & Pankaj Vashisht & Debosree Banerjee, 2009. "Indian Economic Outlook 2008-09 and 2009-10," Macroeconomics Working Papers 22916, East Asian Bureau of Economic Research.
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    More about this item

    Keywords

    Balance of payments; invisibles; FDI; globalisation; liberalisation;

    JEL classification:

    • F1 - International Economics - - Trade
    • F3 - International Economics - - International Finance
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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