Indian Economy Module
Balance of Payments, Foreign Trade & Capital Markets
India's external trade and capital markets connect the domestic economy with global financial flows. The Balance of Payments (BoP), maintained by the RBI, records all economic transactions between Indian residents and the rest of the world, bifurcated into the Current Account (trade in visible goods and invisible services, remittances) and the Capital Account (FDI, FPI, external commercial borrowings). Capital markets are regulated by the Securities and Exchange Board of India (SEBI), established as a statutory body in 1992. India's primary stock exchanges, the Bombay Stock Exchange (BSE, Asia's oldest) and the National Stock Exchange (NSE), track market capitalization through benchmark indices Sensex and Nifty 50.
Key Concepts & Examination Highlights
- The Current Account deficit (CAD) occurs when a country's total imports of goods, services, and transfers exceed its total exports.
- SEBI was given statutory powers on January 30, 1992, through the Securities and Exchange Board of India Act 1992.
- The Bombay Stock Exchange (BSE) was established in 1875 as 'The Native Share & Stock Brokers' Association' and is Asia's oldest exchange.
- Foreign Direct Investment (FDI) represents long-term equity investment in physical enterprise assets, whereas FPI represents short-term portfolio holdings.
Curriculum & Reference Sources: RBI Annual Reports on Foreign Exchange, Directorate General of Foreign Trade (DGFT), SEBI Bulletins.