Autonomous and accommodating transaction

01-Aug-2020 16:40

For example, if there is a current account deficit in the BOP, then this deficit is settled by capital inflow from abroad.The sources used to meet a deficit in BOP, are: (i) Foreign exchange reserves; (ii) Borrowings from IMF or foreign monetary authorities.Suppose a foreign exporter buys an advertising agency in the country at the cost of Rs.80 crore for expanding the market for his products.Students (upto class 10 2) preparing for All Government Exams, CBSE Board Exam, ICSE Board Exam, State Board Exam, JEE (Mains Advance) and NEET can ask questions from any subject and get quick answers by subject teachers/ experts/mentors/students.If a country has a deficit or surplus in its balance of current account, there are always some off-setting transactions on the capital account to bring the balance of payments in a state of equilibrium.These items are also known as ‘below the line items’.Accommodating transactions are compensating capital transactions which are meant to correct the disequilibrium in autonomous items of balance of payments.

These items are also called ‘below the line items’.

Surplus or Deficit in BOP: BOP account is in surplus when autonomous receipts are more than the autonomous payments.