Explain The Salient Features Of Balance Of Payments And Balance Of Trade?

The balance of trade refers only to the merchandise or balance on visible transactions alone. In short, it is the difference between the values of exports and imports of physical goods of a country during a given period of time. If the values of (visible items) exports exceed the value of imports of visible items, it is said to be surplus or favorable balance of trade. The increased imports of machinery, equipments raw material and oil prices have caused imports to grow faster. Causes of unfavorable balance of trade are included in the causes of adverse balance of payments because of balance of payments refers to the sum of both the balance on visible as visible as well as invisible items.

The balance of payments is a comprehensive record of economic transactions of the residents of a country with the rest of the World during a given period of time. The aim is to present an account of all receipts and payments on account of goods exported services rendered and capital by resident of a country and goods imported, services received and capital transferred y residents of the country.

The Government through licensing system regulates imports and necessary adjustments are made between restriction and relaxation of imports according to the requirement of the economy and the availability of foreign exchange earned through exports. Steps should be taken to increase the agricultural production so as to eliminate food deficiency from the country and to increase exportable surplus. The manufacturing industries should also be given necessary stimulation so that their production may increase to replace imports.