INTERNATIONAL ECONOMIES :( BOP AND BOT):

Balance of Payments:

The balance of payments accounts of a country record the payments and receipts of the residents of the country in their transactions with residents of other countries. If all transactions are included, the payments and receipts of each country are, and must be, equal. Any apparent inequality simply leaves one country acquiring assets in the others. For example, if Americans buy automobiles from Japan, and have no other transactions with Japan, the Japanese must end up holding dollars, which they may hold in the form of bank deposits in the United States or in some other U.S. investment. The payments of Americans to Japan for automobiles are balanced by the payments of Japanese to U.S. individuals and institutions, including banks, for the acquisition of dollar.

There will be inequalities between the money even though the receipts are the same which we call that receipt as a surplus or deficit.

Balance of Trade:

The difference in value over a period of time between a country’s imports and exports of goods and services, usually expressed in the unit of currency of a particular country or economic union (e.g., dollars for the United States, pounds sterling for the United Kingdom, or euros for the European Union). The balance of trade is part of a larger economic unit, the BALANCE OF PAYMENTS (the sum total of all economic transactions between one country and its trading partners around the world), which includes capital movements (money flowing to a country paying high interest rates of return), loan repayment, expenditures by tourists, freight and insurance charges, and other payments.

If the exports of a country exceed its imports, the country is said to have a favorable balance of trade, or a trade surplus. Conversely, if the imports exceed exports, an unfavorable balance of trade, or a trade deficit, exists. According to the economic theory of mercantilism, which prevailed in Europe from the 16th to the 18th century, a favorable balance of trade was a necessary means of financing a country’s purchase of foreign goods and maintaining its export trade. This was to be achieved by establishing colonies that would buy the products of the mother country and would export raw materials (particularly precious metals), which were considered an indispensable source of a country’s wealth and power.

Conclusion:

So finally with the help of these two main factors the foreign courts is trading which have a greater use for the development of the Indian Economy.

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