3A Flashcards
What is BOP?
- It is a systematic record of all economic transactions made between the residents and non-residents of a country for a specific time period, usually a year.
- Central Banks of each country prepare BoP records as per the format given in IMF’s BPM-6 manual, all the figures are expressed in Dollar$.
- Since any country’s debit (outgoing money) is a credit (incoming money) for another country → World’s NET Balance of Payment is ZERO.
Bop classification
- BoP is further sub classified into two parts → Current Account and Capital Account, based on the nature of transactions.
RBI’s methods of BOP classification
Current Account -
Goods and services
Primary Income: wages, dividend, interest
Secondary income: remittance, gift, donation
Capital & Financial Account
- Direct Investment (FDI)
- Portfolio Investment (FPI)
- Loans / ECB
- Non-resident’s investment in Bank, Insurance, Pension schemes.
- RBI’s foreign exchange reserve
Current Account Deficit in the last 3 years 2016-2019 increased or decreased and reason?
- The Current Account Deficit ⏫ in last 3 years (2016-19) because
- crude oil price ⏫
- US/EU protectionism= our exports ⏬.
What is Balance of Trade (BoT)
It’s the difference between the value of import and export (of goods and services)
Export MINUS Import = MINUS (-)
- If -ve = Trade Deficit (i.e. Import > Export)
- If +ve = Trade Surplus (i.e. Export > Import)
What is Net Terms of Trade (NTT) or Commodity terms of trade?
𝑁𝑇𝑇 = 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑒𝑥𝑝𝑜𝑟𝑡/𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑖𝑚𝑝𝑜𝑟𝑡 ∗ 100 = 𝑓𝑜𝑟 𝐼𝑛𝑑𝑖𝑎 𝑖𝑡′𝑠 < 100.
Meaning ($ or value) we are importing more and exporting less.
What is Gross Terms of Trade (GTT)?
𝐺𝑇𝑇 = 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝑖𝑚𝑝𝑜𝑟𝑡/𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝑒𝑥𝑝𝑜𝑟𝑡 ∗ 100 = 𝑓𝑜𝑟 𝐼𝑛𝑑𝑖𝑎 𝑖𝑡′𝑠 < 100.
So, in physical quantity (kg, litres) we are exporting more than importing. This is possible because exported Indian rice’s quantity (kg) could be large even though its value ($) will not be very large.
India has trade deficit and trade surplus with which countries?
India’s top 5 trading partners?
We’ve large Trade Deficit: with China (cheap electronics, toys etc.) Switzerland (Gold, Luxury items), Middle Eastern nations (Oil).
We’ve Trade Surplus: with USA (Chemicals, textile, services etc.), UAE (Tea, Spices, textile etc.).
- India’s top five trading partners are USA, China, UAE, Saudi Arabia and Hong Kong
Largest importer and exporter in world for goods and services - 2018
(IYB20 Ch7): Largest importer and exporter in world
Goods (Merchandise)
Largest Importer #1:USA…..#10: India
Largest Exporter #1: China…. #19: India
Services
Largest Importer #1:USA…..#10: India
Largest Exporter #1: USA……#8: India
❓MCQ. The balance of payments of a country is a systematic record of (Asked in UPSC-Pre-2013)
(a) All import & export transactions of a country during a given period of time, normally a year.
(b) Goods exported from a country during a year.
(c) Economic transaction between the government of one country to another.
(d) Capital movements from one country to another.
a
❓MCQ. Which of the following does not form part of current account of Balance of Payments? [UPSC-CDS-2014-II]
(a) Export and import of goods (b) Export and import of services
(c) Income receipts and payments (d) Capital receipts and payments
d
❓MCQ. With reference to Balance of Payments, which of the following constitutes/ constitute the Current Account? (Asked in UPSC-Pre-2014)
1. Balance of trade. 2. Foreign assets. 3. Balance of invisibles. 4. Special Drawing Rights.
Answer codes: (a) 1 only (b) 2 and 3 (c) 1 and 3 (d) 1, 2 and 4
c
❓MCQ (Pre19-SetA Q37). Among the following, which one of the following is the largest exporter of rice in the world in the last five years?
(a) China (b) India (c) Myanmar (d) Vietnam
b
MCQ (Pre19-SetA Q84). Among the agricultural commodities imported by India, which one of the following accounts for the highest imports in terms of value in the last five years?
(a) Spices (b) Fresh fruits (c) Pulses (d) Vegetable oils
d
What does the World Bank’s Remittance Report say about remittance of India?
- In quantitative figures too India received more amount compared to previous years. Because higher oil prices → Arabian Sheikhs are earning more and spending more → Indian workers in middle east are earning more overtime → more remittance to India.
- World Bank also noted: remittances have a direct impact in poverty removal for many households
- but Post Offices charge very high fees in remitting the money to household.
- so Financial inclusion, UPI/BHIM/IMPS blockchain Technology led money transfer mechanism are important in that context as well.
Global migration report 2020 released by?
Top amount of remittance received?
Top number of international migrants are from?
Top destination country of migrants?
- The International Organization for Migration (IOM, HQ: Geneva, Switzerland) is a related organization of UN. As per its latest Global migration report 2020.
- Top amount of remittance received to 1) India 2) China 3) Mexico.
- Top number of international migrants are from 1) India 2) Mexico 3) China
- Top destination country of migrants is USA.
Under Remittance - what is Pravasi Bharatiya Diwas (PBD)?
1915 9th January: Gandhi-ji returned from S.Africa to Bombay (India).
2003 govt decides to celebrate Pravasi Bharatiya divas (PBD) annually every 9th January. First summit @New Delhi.
2015 govt converts PBD into “biennial” event i.e. grand festival every second year
- every other year, only a small event in India, and regional PBD event in a foreign country
2017 @Bengaluru, Karnataka.
2018 Singapore
2019 @Varanasi, Uttar Pradesh
- THEME: “Role of Indian Diaspora in building a New India.”
- 15th Pravasi Bharatiya Divas Convention was organized from 21 to 23 January 2019 instead of 9th January, so that NRIs could visit Prayagraj for Kumbh Mela and witness the Republic Day Parade at New Delhi on 26th January 2019
2020 @New Delhi. But just a small scale video conference type of event.
2021 - The theme of 16th Pravasi Bharatiya Divas Convention 2021, held virtually on 9th January 2021 is “Contributing to Aatmanirbhar Bharat”
at New Delhi
What is the Govt doing about its target of reducing the oil import by 10% by 2022 (compared to 2015)?
➢ Govt’s target of reducing the oil import by 10% by 2022 (compared to 2015).
➢ Therefore, boosting domestic oil exploration & production is necessary. So,
Domestic Oil Exploration Policies
- Nodal? Directorate General of Hydrocarbons (DGH) Ministry of Petroleum & Natural Gas.
- Before the 1991’s LPG reforms, only ONGC and other Public sector companies were allowed to explore the oil, gas and hydrocarbon reserves in India. But under 1991’s Liberalization norms, this sector was opened for the private sector players as well.
- 1997: New Exploration Licensing Policy (NELP: to award contract to public and private sector companies using bidding / auction system.
NELP’s limitations and replacement?
NELP’s primary limitations were →
- Separate license required for each type of hydrocarbon.
- NELP worked on production sharing contract (PSC: , wherein the Oil Explorer will pay a share to Govt from the profits from production.
However, - whenever the oil prices ⏬in the global market, Indian producers will also ⏬their production.
- Indian producers exaggerate their production costs to show less profit. → Govt earned less and lead to inspector raj and no ease of doing Biz.
Hence in 2016, NELP was replaced with Hydrocarbon Exploration and Licensing Policy (HELP).
✓ Single uniform license sufficient to explore and produce all type of hydrocarbons from the given area. (oil, gas, coal bed methane, shale gas, tight gas and gas hydrates etc)
✓ Govt to receive a share from gross revenue from sale of oil / gas etc, irrespective of company’s profit.
✓ Government not to interfere in the marketing and pricing of the oil and gas.
✓ Relaxed norms for exploration in offshore areas, because they have higher risk and higher cost of production.
✓ Open Acreage Licensing Policy (OALP) → company can pick and choose the blocks from the designated area, even if no specific bids are invited by Govt before. Then Government will invite other companies for auction.
✓ 2019-July: Govt finished auctioning process of HELP-OALP round 2 and 3.
What are the objectives of India’s Strategic Oil Reserves ?
Objective? (When crude prices are low) India should buy and store crude oil for strategic- cum-buffer stock → to be used during war & other emergency.
- Ministry of Petroleum & Natural Gas should set up Govt petroleum companies in the east and west coast of India
- It should be stored in underground rock cavern facilities = more secure / safe during airstrikes, more economical and environmental friendly than conventional ‘Above Ground Storage Tanks’ (which may require additional cooling / AC).
OPEC year, members and HQ?
1961: Organization of the Petroleum Exporting Countries (OPEC) is a group of oil producing countries Saudi, UAE, Venezuela, Iran, Iraq etc.
total 14 members. HQ: Vienna city of Austria.
Qatar withdrew from 1/1/19. Russia is NOT a member.
What is a Cartel?
Cartel is an association of manufacturers who collude to keep prices high, and keep the competitors away.
What is Sweet and sour crude oil?
Sweet crude oil = Low Sulphur content. Sour crude = High Sulphur content.
What is BRENT Index?
RENT Index is an index to measures crude oil price, mainly in North West Europe.