BOP (Balance Of Payment)

BOP (Balance Of Payment) is a record transaction of a country resident and rest of the world. It is also known as a International Payment. It represents the countries strength and its representation throughout the world. It includes fiscal and current accounts. The First BOP crisis happened in mid 1960's which is roughly around 1965 where India was in war with Pakistan .It slowly losing its support on U.S.A

•      US response on Indian BOP Crisis:- As a response U.S.A  has suspend its financial aid. They  refused to renew its PL 480 agreement on long term basis. As U.S.A wanted India to adopt a new policy and lost its rupee value. In the scenario world bank enters in the play and started supporting U.S.A. {PL 480 It is a policy in which USA signed an agreement with more than 50 countries and on that India was also a part of this agreement that USA will policy aid and food to other countries at the time of crisis.}

•      Trade Deficit:- In the late 1965 India has faced a trade deficit of Rs.542 Crore (The net invisible is Rs.500 Crore and BOP deficit is Rs.42 Crore).The weight of the GDP is 3.8% of the trade deficit. Through this there has been shortage of raw materials and the dollar due to strict government regulation on the trade.

•      Second BOP Crisis:- It is the most important and revolutionary event occurred in 1989.It has its origin in the second oil shock in 1979.Due to second oil shock there has been double the price of imports. In 1980-1983 there has been a Global Recession through this India has suffered a lot of its production. In this period there has been a political instability. The domestic production has been increased and surplus in imports.

•      Emergency Gold Loan:- In order to gain Dollars which is require for its import payment India seek I.M.F (International Monetary  Fund).India got a conditional loan of $2.2 Billion keeping 67 tons of Gold as collateral security. In this 47 tons has been send to "Bank Of England" and 20 tons went to Union Bank Of Switzerland as a collateral security.

•      Mortgaging National Sentiments:- As the Gold was mortgage which was the secret source of wealth disturbs the whole nation. There was protest held against this action of negligence. It was revealed that the van transporting gold was break down during the journey to airport. As this action led to closer of Chandra Shekhar government and led to kick start of P.V. Narsimha Rao economic reforms.

•      Comparison with South Korea:- India to South Korea, the both nation had same per capita income  in 1956.Eventually India was  a way whereas South Korea has emerged as economic giant through opening of economy. As this comparison clearly  says  of ideological hang up and now it is times  free from it .

•      Negligence of BOP:- The balance of payment crisis  has some eye opening facts and universal truth. Therefore the importance of the BOP crisis gained importance in India  at 1990's because  it has largely at which happened at drastic level.

   

  Mehul Kumar "Mukul"

             20153039