India’s External Debt & Associated Challenges

Introduction

Balance of payments refers to economic transactions of a country with the rest of the world within a given period of time i.e. in a year. It has two components as follows:

1. Current Account refers to difference between exports and imports of goods, services and transfers. It also factors in income received from interest and dividend payments, and net transfer payment in the form of loans and grants. Current Account Deficit results from the situation when imports exceed exports and results in net outflow of foreign exchange.
2. Capital Account factors in foreign direct investment, ....