Talked to Vipin chettan afer a long time.It seems like he was in Culcutta, on the way back home.Apparently, he has completed his IIM course.And could not talk to him further, as his phone switched off.He sounded somewhere outside, probably with hangover of last night with a phone with low battery charge.Nevertheless, the brief chat chat with him was nice.He has got into some retail firm in kuwait.Though, he sounded not so happy, he said would join the firm.Seems-like, he prefers to be some Indian company. Nice to hear that , atleast some IIM grad wants to stay in India(for whatever the reson outcome is important here).
Otherwise, was learning about Current Account and Capital account today.
Current account contains Balance of Trade(BOT) and Balance on Invisible(BOI).
BOT is the net trade on "Goods" ie. export-import.
BOI is the same thing wrt to services.Also, net Remmitence,net tourism,net education and medical treatment also fall under BOI.
Total of BOI and BOT if "positive" then we have a surplus and if "negative" we have a deficit.This is famously known as CURRENT ACCOUNT DEFICIT(CAD).
The third and the final account through which foreign exchange is managed is Capital account.
Investments, borrowings,NRI deposits, External assistance are accounted in this account.
Our CAD is finaced through Captital a/c inflows.
If a country fails to stem the deficit then it is in a Balance of payament crisis.
Most often countries borrows to meet their deficit, as they dont have the sovereignty to print money( like the option available in the case of fiscal deficit).
Currently India is going through a high CAD crisis.It is as high as 4.3% of GDP.With its deficit brother(Fiscal deficit) also at alarming level, needless to say Indian economy is in a bad shape.
Only good news is that he have enough Foreign reserve to hedge the current crisis, but forex is depleting with intimidating Capital a/c inflow.
And, China has a Current account surplus.
Otherwise, was learning about Current Account and Capital account today.
Current account contains Balance of Trade(BOT) and Balance on Invisible(BOI).
BOT is the net trade on "Goods" ie. export-import.
BOI is the same thing wrt to services.Also, net Remmitence,net tourism,net education and medical treatment also fall under BOI.
Total of BOI and BOT if "positive" then we have a surplus and if "negative" we have a deficit.This is famously known as CURRENT ACCOUNT DEFICIT(CAD).
The third and the final account through which foreign exchange is managed is Capital account.
Investments, borrowings,NRI deposits, External assistance are accounted in this account.
Our CAD is finaced through Captital a/c inflows.
If a country fails to stem the deficit then it is in a Balance of payament crisis.
Most often countries borrows to meet their deficit, as they dont have the sovereignty to print money( like the option available in the case of fiscal deficit).
Currently India is going through a high CAD crisis.It is as high as 4.3% of GDP.With its deficit brother(Fiscal deficit) also at alarming level, needless to say Indian economy is in a bad shape.
Only good news is that he have enough Foreign reserve to hedge the current crisis, but forex is depleting with intimidating Capital a/c inflow.
And, China has a Current account surplus.
No comments:
Post a Comment