Kishor Bhanushali

Faculty – Economics
IBS - Ahmedabad
Balance of payment is a comprehensive record of economics
transactions of the residents of a country with the rest of the world
during a given period of time
Current account includes items like exports, expenses on travel,
transportation, insurance, investment income, etc. These relates to
current transactions
The capital account on the other hand is made up of capital
transactions e.g. borrowing and lending of capital, repayment of
capital, sale and purchase of securities and other assets to and from
foreigners – individuals and governments
The difference between the value of commodity exports and imports
is known as the balance of trade
Current Account
1. Merchandise
a. Exports
b. Imports
2. Invisible
a. Services: Travel, Transportation, Insurance, Misc.
b. Transfers : Official, Private,
c. Investment income
Capital Account
1. Foreign investment
a. In India: Direct, Portfolio
b. Abroad
2. Loans :
a. external assistance: by India, to India
b. commercial borrowings: by India, to India
3. Banking Capital
a. Commercial Banks: Assets, Liabilities, Non Resident Deposts
4. Rupee debt service
 Fixed exchange rate policy
Floating exchange rate policy
Managed floating
Changes in equilibrium exchange rate
5. Change in domestic prices
6. Change in the real income
7. Change in rate of interest
8. Structural change
9. Speculative demand and supply