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1. Balance of trade is an annual statement showing the value of exports and imports of goods (merchandise).

2. Balance of trade is favourable (surplus) when exports of goods exceeds imports. BoT is unfavourable (deficit) when import of goods exceeds exports. BoT is in balance (equilibrium) when the value of export of goods equals the value of import goods.

3. Balance of payments is an annual statement showing the exports and imports of both goods (visible) items) and services (invisibles) and flows of capital.

4. Balance of payments comprises the current account and capital account. Current account records transactions of exports and imports of both visible and invisible items.

The examples of visible items are: engineering goods, electronic goods, readymade clothes, leather goods, etc. The invisible items include services like banking, insurance, shipping, consultancy, etc.

5. Capital account of BOP records transactions of flow of capital such as investment, debt. NRI deposits, etc.

6. Overall balance of payments is the sum of current account and capital account which always remaining balance.

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