Question

What is included in the current account balance?

Short answer

Exports and imports of goods and services, Income from abroad and unilateral transfers.

Step-by-step solution

Step1. Introduction

In the Balance of Payments for a country, there are primarily 2 accounts-

Current Account, and

Capital Account

Step2. Explanation

The current account includes the following components:

Balance of Trade of goods primarily, and also services. If the exports exceed imports, it is surplus, otherwise deficit.

Net income earn from abroad: It includes all the monetary transfer of dividends and capital gains over the money invested in the foreign markets, and also the payment of the same to the foreigners who invested in the Indian market.

Unilateral transfers, as the name suggests, refers to one way flow of money. It can be in the form of gifts, remittances, donations, etc. It accounts for one of the largest part of Current Account.