← GlossaryTrade & Currency
Balance of Payments
The balance of payments combines the current account, covering trade, income and transfers, with the capital account, covering investment and loans. When more foreign money arrives than leaves, the RBI’s reserves rise; when less does, they fall.
Why It Matters
It explains why the rupee strengthens or weakens over a year.
In India
In years when foreign investors pour money into Indian shares, India’s capital inflows can more than cover its trade deficit.