Discuss the measures to correct disequilibrium in Balance of Payment?
Discuss the measures to correct disequilibrium in Balance of Payment?
Discuss the measures to correct disequilibrium in Balance of Payment?
1- EXPORTS MUST BE PROMOTED AND IMPORTS RESTRICTED
1- EXPORTS MUST BE PROMOTED AND IMPORTS RESTRICTED
If the exports have declined, appropriate steps should be taken to encourage them. For this purpose, the level of costs in the country should be brought down. This measure will help in cutting down of wages and interest rate and other income.
2- DEVALUATION OF THE HOME CURRENCY
2- DEVALUATION OF THE HOME CURRENCY
Another effective measure is to devalue the external value of the home currency. This step will help in cheapening domestic goods for the foreign markets. As a result of the fall in the external value of the currency with respect to the foreign currencies, the price of the goods to be exported fall and the price of imports go up. This act encourages exports and discourages imports.
3- POLICY OF DEFLATION AND REDUCING PRICES
3- POLICY OF DEFLATION AND REDUCING PRICES
Since inflation or high prices in the country discourages exports and encourages imports, therefore, if steps are taken to check inflation and lower the prices in the country.
4- EXCHANGE CONTROL
4- EXCHANGE CONTROL
According to exchange control policy, all exporters are direct to surrender their foreign exchange to the central bank. Central bank provides license to the importers for their importing needs. None else allowed importing goods without a license holder. Thus, the balance of payment is rectified by keeping the imports within desired limit.