Balance of Payments is one of the important topics in the syllabus of RBI Grade B, SEBI Grade A, and NABARD Grade A/B. It is a tricky topic as the components of the Balance of payments such as current account and capital account tend to confuse us. In this blog, let’s get our basics right about the two most important accounts of Balance of Payments and let us discuss the Current Account vs Capital Account.
Balance of Payments – Current Account vs Capital Account
Balance of Payments
The Balance of Payments or BoP is a statement or record of international trade and financial transactions made between a country and the rest of the world within a defined period. These records include transactions made by individuals, companies, and the government.
Components of BoP
| CURRENT ACCOUNT | CAPITAL ACCOUNT |
|---|---|
| It records the export and import of merchandise and unilateral transfers that are done during a year by a nation. | It records the trading of foreign assets and liabilities during a year by a country. |
| It reflects the net income of the country. | It reflects the net change in ownership in the national assets. |
| It is concerned with the receipt and disbursements of cash and non-capital items. | It is concerned with the sources and application of capital. |
| Key components of the current account are the export and import of goods and services, the investment income, and current cash transfers. | Key components are Foreign Direct Investment, Foreign Portfolio Investment, Government loans, etc. |
To read completely about the Balance of Payments, download the free eBook here.
Balance of Payment PDF
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