Deficit in BOP can be solved by:
i) Import substiution. It implies domestic production of raw materials, consumer goods and capital goods that have otherwise been imported.
ii) Export promotion. It means exporting goods from India. To earn more foreign exchange, export promotion measures should be taken.
iii) Depreciation of domestic currency. It means fall in the value of currency e.g., if exchange rate rises from Rs 60 for 1 dollar to Rs 70 for one dollar. It encourages exports and discourages imports.
