Q.What is meant by disequilibrium in the Balance of Payments? State its causes.

A country's BOP is rarely perfectly balanced in an economic (not just accounting) sense — it usually shows either a persistent deficit or a persistent surplus, for identifiable reasons. …

A country's BOP is in equilibrium when total receipts from abroad equal total payments to abroad. In practice this rarely holds, and the BOP shows disequilibrium — a persistent deficit (payments > receipts) or surplus (receipts > payments).

Causes:

• Cyclical causes — world trade cycles (boom/depression) affect exports and imports unevenly.
• Structural causes — a shift in demand/supply pattern, e.g. a cheaper foreign substitute reducing demand for a country's exports.
• Secular (long-term) causes — a developing economy's persistent need to import capital goods for industrialisation.
• Population growth — raises import demand for food/consumer goods faster than domestic output or exports can grow.
• Natural calamities — droughts/floods forcing emergency imports and reducing exportable surplus.
• Change in demand/fashion — reduces demand for a country's traditional exports. …

Listing only 'imports more than exports' as the cause, without identifying the underlying economic reason (cy …