Outflow : Nil
Balance : Rs.2, 00,000 (+)
Capital Accounts Balance: Rs.5, 40,000 (+)
Overall Balance Rs. 5, 43,000 (+)
There is a net surplus of Rs.5, 43,000 in the balance of payments. This means, there will
be an increase of reserves by this amount.
Note: The transaction No.7 did not enter into the BOP Statement since this transaction
does not involve any foreign country. The entire transaction has taken place in Indian
rupees within India.
Illustration
Problem 2
Convert the following rates into outright rates and indicate their spreads:
Spot I-month 3 - months 6 - months
Rs/$ 35,6300/25 20/25 25/35 30/40
Rs/-- 55, 2200/35 40/30 50/35 55/42
Rs/DM 23, 9000/30 30/25 40/60 45/65
Solution 2
(a) Rupee Rate of DollarAn observation of the figures indicates that the first figure is lower than the second in all
3 forward quotes, implying dollar is being quoted at premium in the forward market.
Thus, the points will be added to the corresponding spot rates. Accordingly, the rates are:
Spot I-month 3 - months 6 - months
Bid price (Rs) 35, 6300 35, 6320 35, 6325 35, 6330
Ask Price (Rs) 35, 6325 35, 6350 35, 6360 35, 6365
Spread (Rs) 0.0025 0.0030 0.0035 0.0035
(b) Rupee Rate of Pound Sterling