1. MICROECONOMICS PRESENTATION
(Under the guidance of Prof.Samik Shome)
PRESENTED BY-
GROUP-11-Marketing-C
Abhiney sharma-10SBCM0186
Kanti nath banerjee-10SBCM0148
Harsh tiwari-10SBCM0448
Pratiksha kastwar-10SBCM0162
Aniket kumar-10SBCM0374
Rishu garg-10SBCM0289
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5.  Record of nation’s international transactions.
 Keeps a track of incoming and outgoing
money.
 Shows whether a country is a net borrower or
net lender.
 It is one of a concern of a nation for its
economic growth
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6.  Current account.
Trade account-visible.
Services-invisible.
Income-invisibles.
Unilateral transfers-invisibles.
 Financial account or Capital account.
 Statistical discrepancy or accommodating
capital transactions.
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7.  Current account-
It is the sum of the balance of trade (net earnings on exports
– payments for imports) , factor income (earnings on foreign
investments – payments made to foreign investors) and cash
transfers
entries under Current account might include-
 Trade – buying and selling of goods and services
◦ Exports – credit entry
◦ Imports – debit entry
 Trade balance – the sum of Exports and Imports
 Factor income – repayments and dividends from loans and
investments
◦ Factor earnings – credit entry
◦ Factor payments –debit entry
 Factor income balance – the sum of earnings and payments.
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8. Capital account-
Where trade involving financial assets & International investments
are recorded . It shows the inflows & outflows of capital.
Credit : foreign countries buying financial assets in India such as land
and buildings
Debit: India buying financial assets in foreign countries.
Statistical discrepancy or accommodating capital
transactions-
 Called as omissions and errors.
 Government cannot accurately measure all transactions that take
place.
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9.  Deficit is the amount by which debit exceeds
credit
 Surplus is the amount when credit exceeds
debit
Types of deficit:
 current account deficit:
 Visible deficit or trade deficit: merchandise account
 Invisible deficit: service account, income
account, unilateral transfers
 Financial account deficit:
 Basic deficit : current account deficit + FDI
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10.  Adjustments of exchange rates:
An upwards shift in the value of a nation's currency relative
to others will make a nation's exports less competitive and make
imports cheaper and so will tend to correct a current account
surplus. It also tends to make investment flows into the capital
account less attractive so will help with a surplus there too.
Conversely a downward shift in the value of a nation's currency
makes it more expensive for its citizens to buy imports and increases
the competitiveness of their exports, thus correcting a deficit.
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11.  Nations can agree to fix their exchange rates
against each other, and then correct any
imbalances that arise by rules based and
negotiated exchange rate changes and other
methods
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12. Account Net balance
Merchandise -$214710
Services $38,175
Income $30,835
Unilateral transfers -$28,390
CURRENT ACCOUNT -$174,091
FINANCIAL ACCOUNT $116,187
Statistical discrepancy -$39,487
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13.  India facing BOP disequilibrium since Indipendence,culminating a
disaster in 1990-91.
 It was always under pressure & had a huge deficit due high import of
food grains & goods, heavy external borrowing, payments & poor
export.
 Govt implied Protectionist policies(1956-61) to boost domestic
Industrialization as an import substitution, thus enhancing the
export.
 But high degree of protection in Indian industries led to inefficiency
& poor product to compete with the world market as well as in Indian
market too.
 Lack of competition & higher production cost also led to poor export.
To curb the BOP imbalance out of panicky,Govt resorted large scale
foreign borrowings for its developmental efforts which backfire
Indian economy as debt service obligations rose sharply.
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14.  An economic recovery from 1968–69, however, eased the
problem, and by September 1970, foreign exchange reserves
amounted to $616 million, as compared with $383 million by
December 1965. Reserves declined to $566 million by the
end of 1972 but increased to $841 million as of 1975.
 Indian export was dependent on world trade situations, as we
were basically primary product exporters, the earnings was
low & unstable, the quality was low too.
 The instability of the exchange value was also a problem for
Indian export,govt had strongly an inward looking policy.
 The process of liberation started form mid 80s,restriction on
certain Imports were removed, but the situation was already
out of hand which led to 1990-91 crisis. Today although we
have BOP imbalances its devolved and more productive than
last decade.
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