(a)

Explain the likely impacts of the ‘Make in India’ policy initiated by Government of India on the Balance of Payments (BoP) of India (assuming all other factors constant).

(b)

State the meaning of Balance of Payment (BoP) surplus and deficit.

Assuming all other factors are constant, the ‘Make in India’ policy is likely to improve the situation of Balance of Payments (BoP) of India as it may increase the domestic production and promote net exports. This may lead to greater inflow of foreign exchange, which is recorded on the credit side of the current account, thereby improving the overall BoP position.

Balance of Payments (BoP) Surplus refers to a situation under which, inflows of foreign exchange exceed outflows of foreign exchange on account of autonomous transactions, over a period of time.

Balance of Payments (BoP) Deficit refers to a situation under which, inflows of foreign exchange fall short of outflows of foreign exchange on account of autonomous transactions, over a period of time.