Explain a situation where the balance of payment is deficit.

Asked by Topperlearning User | 19th Apr, 2016, 10:54: AM

Expert Answer:

When receipts of the country comes from autonomous transactions are less than the corresponding payments to the rest world during the period of an accounting year. It shows net liabilities towards rest of the world. This is a situation of deficit in balance of payments.

There are certain positive and negative impacts of deficit in balance of payment. When deficit occurs on account of capital import which is required for advancing process of growth and development, it is the positive impact of deficit in balance of payment. Negative impact is that it shows the Indian liabilities to rest of the world. These liabilities strain on the GDP by making payments to the rest of the world.

Answered by  | 19th Apr, 2016, 12:54: PM