Balance of Payments
A record of all economic transactions between a country's residents and the rest of the world in a period.
Formula
Balance of Payments = Current Account + Capital Account + Financial Account + Errors and Omissions = Change in Reserves
Unit
₹ crore
In depth
The balance of payments always balances by construction: a current account deficit must be financed by capital inflows or by drawing down reserves. What matters is the quality of that financing — foreign direct investment is stable and long-term, while portfolio flows can reverse within days, which is why a deficit funded by hot money is far more fragile than the headline number suggests. India's reserves accumulate when capital inflows exceed the current account deficit. The 1991 crisis, when reserves fell to weeks of import cover, is the reference point for why this account is watched.
Worked example
A current account deficit of USD 25 billion financed by USD 40 billion of capital inflows adds USD 15 billion to reserves. If the inflows are portfolio money that leaves next quarter, the deficit must then be funded from those reserves.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Balance of Payments” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.