The Balance of Payments (BoP) is an accounting concept and a statistical statement that systematically records all economic transactions between a country's residents and the rest of the world over a specific period, typically a quarter or a year. The concept was developed in the 19th century to track and analyze international payments as global trade and financial integration increased. It operates on a double-entry bookkeeping system, where every inflow of money (credit) must be offset by an outflow (debit), meaning that the sum of all accounts theoretically equals zero.
The BoP is primarily divided into two main accounts: the Current Account and the Capital Account. The Current Account tracks the flow of goods (merchandise trade), services (invisibles like IT and tourism), income, and current transfers such as remittances. The Capital Account records transactions involving financial assets and liabilities, including Foreign Direct Investment (FDI), Portfolio Investment (FPIs), and External Commercial Borrowings (ECBs). A deficit in the combined Current and Capital Accounts results in a drawdown of the country's Foreign Exchange Reserves, which are managed by the Reserve Bank of India (RBI).
The BoP is closely connected to the International Monetary Fund (IMF), which provides standardized reporting methodologies. In India, the BoP has seen recent changes, such as the RBI announcing special swap facilities in February and June 2026 to attract foreign capital and strengthen the rupee. These measures are projected to push the overall BoP into a surplus for FY27, even with a projected Current Account Deficit (CAD). Furthermore, India recorded a Current Account Surplus of $7.1 billion in Q4 FY26, the first such surplus in 11 quarters, largely due to strong net services receipts.