Question

Why accommodating transactions are known as below the line items?

Answer 1

These refer to international economic transactions that take place due to some economic motives like earning income and profit maximisation. They have nothing to do with foreign exchange payments. Since such transactions are independent of the state of country’s balance of payment, i.e., irrespective of whether BOP is favourable or unfavourable, they are, therefore, called autonomous items.

These items are generally called ‘above the line items’ in BOP Again, it is autonomous transactions which make deficit or surplus in BOP. BOP is in deficit if the autonomous receipts are less than autonomous payments. BOP is in surplus if the autonomous receipts are greater than autonomous pa3anents. In other words, deficit or surplus in BOP depends upon the balance of autonomous items.

Deficit in BOP account: When during the year total inflows of foreign exchange on account of autonomous transactions are less than total outflows on account of such transactions, there is deficit in BOP.