Current Account Deficit – Part 2
#GS-03 External Sector
Current Account Deficit:
- The current account deficit is the measure of a country’s trade when the value of the goods and services it imports is more than the value of the products it exports.
- Current account deficit is indicative of the fact that a country is importing more than it is exporting.
- Calculating current account includes net income, such as interest and dividends, and transfers, such as foreign aid.
- The difference of exports and imports of goods is referred to as the trade balance.
- Trade Balance is also a part of ‘Current Account Balance’.
- The current account is representative of a country’s foreign transactions and along with the capital account, is a component of a country’s balance of payments (BOP).
Balance Of Payments (BOP)
- The balance of payments (BOP) is also known as the balance of international payments.
- It is the statement which includes all transactions made between entities in one country and the rest of the world over a defined period of time, such as a quarter or a year.
- It is calculated as the sum of all transactions that a country’s individuals, companies, and government bodies complete with individuals, companies, and government bodies outside the country.