Explain the concept of ‘deficit’ in balance of payments.

1.	Explain the concept of ‘deficit’ in balance of payments.
Answer» Deficit in balance of payments means that total inflows on account of autonomous transactions is less than total outflows on account of such transactions. Deficit in balance of payments implies that the foreign countries have some claims against the domestic country. Following are some measures to correct deficit in balance of payments : 1. Imports substitution 2. Export promotion 3. Depreciation of home currency 4. Exchange control 5. Restrictions on imports 6. Control of inflation.

Answer»

Deficit in balance of payments means that total inflows on account of autonomous transactions is less than total outflows on account of such transactions. Deficit in balance of payments implies that the foreign countries have some claims against the domestic country.

Following are some measures to correct deficit in balance of payments :

1. Imports substitution

2. Export promotion

3. Depreciation of home currency

4. Exchange control

5. Restrictions on imports

6. Control of inflation.

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Explain the concept of ‘deficit’ in balance of payments.

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