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Sujai Adithya
Business Development and Banking & Financial Services Expert
Asked a question last year

What are the differences between Balance of Payments (BOP) and Balance of Trade (BOT)?

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Sujai Adithya
Business Development and Banking & Financial Services Expert

Balance of Payments (BOP) – is simply put – the summary of all the ‘economic’ transactions India has had with the rest of the world (ROW) in a financial year.

Balance of Trade (BOT) – is just the summary or the balancing of the total exports and the total imports of India in a financial year.

BOT = Total Exports of visible items – Total Import of visible items

BOP summarizes all the inter-country transactions (all international transactions) and is a wider term – which includes BOT. So, BOT forms a part of BOP. Whereas BOT is a narrower term, and includes only the summary of export and import of visible items.

BOP is a wider term and includes:

  • Visible Items – are those items which are visible/ touchable/ tangible/physical, i.e., they can be seen and measured and touched. BOP includes the export and import of such physical goods.
  • Invisible Items – are those which cannot be seen (and hence invisible) or touched, but can be felt, like services. The import and export of services in included in BOP – services like banking, consultancy services of IT, legal services, architecture, management, CA, insurance and logistics services.
  • Unilateral Transfers – as the name suggests are transactions which are one way.
  • Capital Transfers – are transfer of title or ownership of capital assets across borders. It includes purchase or sale of capital assets like land, building, plant and machinery etc. – but across borders.

BOT includes only the visible items. So, it is a narrower term and is included in the broader term BOP.

BasisBalance of TradeBalance of Payment
MeaningBalance of Trade or BoT is a financial statement that captures the nation’s import and export of commodities with the rest of the worldBalance of Payment or BoP is a financial statement that keeps track of all the economic transactions by the nation with the rest of the world
RecordsGoods related transactions.Transactions associated to both goods and services
Capital TransfersNot included in BoTIncluded in BoP
ResultBoT can either be favourable, unfavourable or balancedBoth the receipts and payments sections tallies.
ComponentComponent of Current Account of the Balance of Payment.Both Current and Capital account
Which is better?Just a partial view of the nation’s economic status is furnished.A clear and complete view of the nation’s economic status is furnished