How will distinguish between balance of payments and balance of trade?


(i) Balance of trade includes exports and imports of visible goods only. On the other hand, balance of payments includes exports and imports of both visible goods and invisible services.

(ii) Balance of trade is a narrow concept as it includes visible items only. Balance of pay­ments is a wider term because it covers both visible and non visible items.

(iii) All the items included in balance of trade are recorded in customs returns. But all the items included in balance of payments, are not recorded in the customs returns.


(iv) Unfavourable balance of trade of a country can be converted into a favourable balance of payments. But unfavourable balance of payments ultimately leads to a deficit.

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