Current Account Deficit – Part 2 - Believers IAS Academy

Current Account Deficit – Part 2

#GS-03 External Sector

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).

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.