Difference b/w BOP and BOT?
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The BOP of a country is a systematic record of all economic transactions between the residents of the home country and residents of the rest of the world during a given year.
By all transactions we mean exports and imports of both goods and services, unrequited transfers as well as capital movements.
Thus, the BOP of a country is a complete picture of its international transactions.
On the other hand, balance of trade (henceforth, BOT) is the difference between visible exports and visible imports. This difference is also called merchandise balance or balance of visible trade. Similarly, one obtains balance of invisible trade which represents the difference between invisible exports and invisible imports. The difference between a nation’s exports of goods and services and its imports is called balance of trade in goods and services, or, balance of trade.
However, as far as balance of trade is concerned, different countries follow some sort of different pattern. In the USA, the difference between a country’s exports of goods (i.e., visibles) and services (i.e., invisibles) and imports of visible goods and invisibles is its BOT.
While BOT as defined by the British authority excludes invisibles and considers only visible items. As far as our discussion goes, we have followed the US tradition. India, however, follows the British tradition.
Whether invisibles are included or not in BOT, it is clear that BOP is a much broader concept than BOT. BOT is classified into balance of invisible trade.
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By all transactions we mean exports and imports of both goods and services, unrequited transfers as well as capital movements.
Thus, the BOP of a country is a complete picture of its international transactions.
On the other hand, balance of trade (henceforth, BOT) is the difference between visible exports and visible imports. This difference is also called merchandise balance or balance of visible trade. Similarly, one obtains balance of invisible trade which represents the difference between invisible exports and invisible imports. The difference between a nation’s exports of goods and services and its imports is called balance of trade in goods and services, or, balance of trade.
However, as far as balance of trade is concerned, different countries follow some sort of different pattern. In the USA, the difference between a country’s exports of goods (i.e., visibles) and services (i.e., invisibles) and imports of visible goods and invisibles is its BOT.
While BOT as defined by the British authority excludes invisibles and considers only visible items. As far as our discussion goes, we have followed the US tradition. India, however, follows the British tradition.
Whether invisibles are included or not in BOT, it is clear that BOP is a much broader concept than BOT. BOT is classified into balance of invisible trade.
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Balance of Trade (BOT)
i. It records only merchandise (i.e., goods) transactions.
ii. It does not record transactions of capital nature.
ADVERTISEMENTS:
iii. It is a part of current account of BOP.
iv. It may be favourable, unfavourable or in equilibrium.
v. Defect in BOT cannot be met by BOP
vi. It is not true indicator of economic relations or economic prosperity of a country.
Balance of Payment (BOP)
ADVERTISEMENTS:
(i) It records transactions relating to both goods and services.
(ii) It records transactions of capital nature.
(iii) It includes balance of trade, balance of services, balance of unilateral transfers and balance of capital transactions.
(iv) It always remains in balance in the sense that receipt side is always made to be equal to payment side.
(v) Defect in BOP can be met through BOT.
(vi) It is true indicator of economic performance of an economy.
i. It records only merchandise (i.e., goods) transactions.
ii. It does not record transactions of capital nature.
ADVERTISEMENTS:
iii. It is a part of current account of BOP.
iv. It may be favourable, unfavourable or in equilibrium.
v. Defect in BOT cannot be met by BOP
vi. It is not true indicator of economic relations or economic prosperity of a country.
Balance of Payment (BOP)
ADVERTISEMENTS:
(i) It records transactions relating to both goods and services.
(ii) It records transactions of capital nature.
(iii) It includes balance of trade, balance of services, balance of unilateral transfers and balance of capital transactions.
(iv) It always remains in balance in the sense that receipt side is always made to be equal to payment side.
(v) Defect in BOP can be met through BOT.
(vi) It is true indicator of economic performance of an economy.
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