Question

Which among the following statement(s) is/ are correct about India’s balance of payment? (NCERT)

1. The current account records of export and import in goods and services and stocks and bonds.

2. “Golden Period” of balance of payment in India was during Independence.

3. High earning from invisible was one of the reasons for satisfactory Bop situation in post reform period.

4. India’s forex Reserve SDR and RTP.

Code:

• A. 1, 2 and 3 only
• B. 2 and 3 only
• C. 3 and 4 only
• D. 3 only

Answer 1

The correct option is C

3 and 4 only

(source: NCERT) The stock and bonds are recorded under Capital Account hence first statement is incorrect. period between 1976-77 to 1979-80 is known as golden period as for as Bop is concerned. This is because India had a small current account surplus of 0.6% of GDP and also possessed forex reserve equivalent to about seven months imort. Thus, statement 2 is incorrect. 3 and 4 are correct.

Balance of payment:- It records the transaction in goods, services and assets between residents of a country with the rest of World. There are two main account in Bop.

1. Current account- Import and Export of goods and services and transfer payment.
2. Capital account- International sales and purchase of assets such as money, stocks, bonds etc.

Main reasons for satisfactory Bop after post- reforms period-

1. High earning from invisible.
2. Rise in External Commercial Borrowing.
3. Non- resident deposits.
4. Role of foreign investment.

Forex Reserve comprises of –

• Foreign currency Asset (FCA)
• Gold
• Special Drawing Rights (SPRs)

Reserve Trench position (RTP) in IMF.