ECONOMICS
BALANCE OF TRADE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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credit current
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debit current
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credit capital
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debit capital
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Detailed explanation-1: -(i) ‘Make in India’ will increase supply (inflow) of foreign exchange in India causing improvement in the balance of payments position. (ii) Import of pulses will lead to outflow of foreign exchange from the country causing adverse effect on balance of payment position.
Detailed explanation-2: -A transitory increase in income due to a demand shock will lower the trade balance. If it is due to a temporary supply shock, the trade balance is likely to improve.
Detailed explanation-3: -Measures Taken by the Indian Government for Improving Balance of Payments: Full Convertibility of Rupee in the Current Account: In budget proposals of 1992-93, a new system named LERMS (Liberalised Exchange Rate Management System) was introduced and since March 1, 1992 double exchange rates system was adopted.
Detailed explanation-4: -ANSWER: Following are the causes of Deficit in BOP or Unfavourable BOP. For fast development, developing countries import machines, technology, and other equipment. This leads to a high level of outflows of foreign exchange that can result in a deficit in the BOP account.