Distinguish between balance of trade and balance of payment.
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S.No.
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Basis
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Balance of Trade
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Balance of Payment
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1.
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Meaning
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Those transactions that arise out of the exports and imports of goods. It does not consider the exchange of services rendered such as shipping, Insurance and banking etc.
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The balance of payments of a country is a systematic record of all economic transactions between the residents of foreign countries during a given period of time.
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2.
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Scope
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It is a narrow concept as it is a component of balance of payments.
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It is a wider concept.
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3.
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Nature of items
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It includes only visible items.
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It includes both visible and invisible items.
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4.
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Nature of Record of capital transactions
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It is a partial record. Hence, it is not a true indicator of economic relations with other countries. Doesn't record transactions of capital nature.
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It is the complete record of economic transactions with the rest of the world. Hence, it provides a true picture of the economy with the rest of the world. Records capital nature transactions.
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5.
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Settlement
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Deficit in balance of trade can be met by balance of payments.
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Deficit in balance of payments cannot be met by the components of balance of trade.
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