Balance of Payments refers to difference between the value of exports and imports of both visible and invisible items, during a particular duration of time. It shows international economic position of the country. It gives complete picture of international transactions.

The structure of India’s balance of payments is divided in to two parts. 

(1) Current account 

(2) Capital account 

1. Current account: All transactions relating to trade in goods, services and unilateral transfers are the part of Balance of payment on current account. It refers to the statement of country’s exporting of goods and services with all other countries in the world for a specific period. 

(a) Visible or merchandise trade relating to imports and exports: Visible or merchandise trade relating to imports and exports is an important item in current account. All those transactions in goods only are included in this. 

(b) Invisible exports and imports: Invisible exports and imports includes all those trading activities relating to services (Insurance, transport, banking, etc) 

(c) Unilateral transfers: Unilateral transfers are part of current account that include donations, gifts, foreign aid, etc. The structure of current account in Balance of Payment is as follows.

(2) Capital Account: The capital account in the balance of payment consists of all the financial transactions in assets of lending and borrowing for both short term and long term. It relates to movement of international capital having maturity of at-least one year. It shows the flow of international loans and investments and reflects the changes in countries’ foreign assets and liabilities. Private and Government transactions are two types of transactions. Direct investments, portfolio and short term investments are in private transactions. Loans to and from foreign official agencies are in Government transactions.

To sum up, the Current Account includes the following: