Trade deficit

Subject: Economy

Context:

Contracting for the sixth straight month, India’s exports slipped 12.66 per cent year-on-year to USD 22.7 billion in August, on account of fall in the shipments of petroleum, leather, engineering goods and gems and jewellery items, as per the government data released

Concept:

Trade deficit

• Trade balance of a country shows the difference between what it earns from its exports and what it pays for its imports.
• If it is in negative that is, the total value of goods imported by a country is more than the total value of goods exported by that country, then it is referred to as a “trade deficit”.

Current Account deficit

• A current account deficit is a trade measurement that says a country imported more goods, services, and capital than it exported.
• It encompasses the trade deficit plus capital like net income and transfer payments.
• Current Account = Trade gap + Net current transfers + Net income abroad