Can anyone give a detailed explanation on capital ac surplus/deficit and current ac surplus/deficit
How are both of them related
When a surplus or deficit happen?
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Current account is only related to trade
I.e X-M wala part.
It includes export and import of merchandise,goods and services, dividend, interest,utility transfer.
Capital account surplus when rest of the world put money in our country.
ALSO, financial accounts which is part of capital account it involves investment in financial markets and purchase and sale of fixed assets (PP&E).
NOW, think of the equation
S-I=X-M (SAVINGS, INVESTMENT, EXPORT AND IMPORT)
Diff of BOP capital and current is zero
If we have current account surplus then it means we have capital account deficit i.e we are funding the rest of the world and vice versa.
I hope this helps you!
I didn’t understand the last para capital ac deficit hai matlab humlog paisa bahar bhej rhe hai to we are funded by others kaise?
Sorry brother slightly mistake by autocorrect i have changed the last para please go through it