Current account:

The current account records imports and exports of goods and services and unilateral  transfers. Balance-of-payments accounts  usually differentiate between trade  in goods and trade in services. The balance of exports and imports of  the former  is referred  to as the balance of visible trade or as  the  balance  of merchandise trade.  It  is often useful for economic purposes to  distinguish between factor and non-factor services. Trade in the latter, of which shipping, banking and insurance services, and payments by residents as  tourists abroad are usually  the most important, is in economic  tms  little  different from trade in goods. That  is, exports and imports of such services are flows of outputs whose values will be determined by the same variables that would affect the demand  and supply  for goods. Factor  services, which consist of  interest, profits and dividends, are on the other hand payments for inputs.

Unilateral transfers, or 'unr,equited receipts', are receipts, which the residents of a country receive 'for  free',  without having to make any present or future payments in return. Receipts fiom abroad are  entered  as  positive items, payments abroad &  negative items.

The net value of the balances of visible trade and of invisible trade and of unilateral transfers  defines the balance on current account shows  the various components of the current accounts of India in 2004-05. Notice that there  is a  large deficit  in merchandise  trade, but an  almost equally large surplus in miscellaneous services, which would include export revenues earned  by call centres and other information technology  enabled services  (ITES).  Also notice that  private  transfers far  exceed official transfers  (foreign aid in the form of grants from other countries).