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| 1. |
A country's Balance of payment on current account showed deficit. Should it be a cause for alarm for the country? Comment. |
| Answer» Solution :DEFICIT in current account of Balance of payments is unfavourable as it shows that outflow of foreign exchange is more than its inflow on account of goods, services and unilateral transfers. This deficit is financed by capital account surplus, it should not be cause for alarm for the country if it can be financed from NET capital inflow from ROW. However if capital account is in deficit itself then efforts should be TAKEN to offset the deficit (RBI may intervene to control the deficit). | |