ternal e tor in ndia      15.7
     government against any foreign currency, it is                  banking body of the economy on behalf
     called devaluation. It means official depreciation              of the government. Current transactions
     is devaluation.                                                 of an economy in foreign currency all
                                                                     over the world are—export, import,
        revaluation                                                  interest payments, private remittances
                                                                     and transfers.
     A term used in foreign exchange market which
                                                                All transactions are shown as either inflow or
     means a government increasing the exchange rate
                                                           outflow (credit or debit). At the end of the year,
     of its currency against any foreign currency. It is
                                                           the current account might be positive or negative.
     official appreciation.
                                                           The positive one is known as a surplus current
                                                           account, and the negative one is known as a
        aPPreciation                                       deficit current account. India had surplus current
     In foreign exchange market, if a free floating        accounts for three consecutive years (2000–03)—
     domestic currency increases its value against the     the only such period in Indian economic history.
     value of a foreign currency, it is appreciation. In        Current account deficit is shown either
     domestic economy, if a fixed asset has seen increase  numerically by showing the total monetary amount
     in its value it is also known as appreciation.        of the deficit, or in percentage of the GDP of the
     Appreciation rates for different assets are not fixed economy for the concerned year. Both the data are
     by any government as they depend upon many            used in analysis as per the specific requirement.
     factors which are unseen.                             As per a RBI release of April 2014, presently the
                                                           sustainable level of current account deficit for
        current account                                    India is 2.5 per cent of the GDP.
     It has two meanings—one is related to the banking        caPital account
     sector and the other to the external sector:
          (i) In the banking industry, a business          Every government of the world maintains a
               firms bank account is known as current      capital account, which shows the capital kind
               account. The account is in the name of a    of transactions of the economy with outside
               firm run by authorised person or persons    economies. Every transaction in foreign currency
               in which no interest is paid by the bank    (inflow or outflow) considered as capital is shown
               on the deposits. Every withdrawal from      in this account—external lending and borrowing,
               the account takes place by cheques with     foreign currency deposits of banks, external bonds
               limitations on the number of deposits       issued by the Government of India, FDI, PIS and
               and withdrawals in a single day. The        security market investment of the QFIs (Rupee is
               overdraft facility or the cash-cum-credit   fully convertible in this case).
               (c/c Account) facility to business firms is      There is no deficit or surplus in this account
               offered by the banks on this account only.  like the current account .
         (ii) In the external sector, it refers to the
               account maintained by every government         balance of Payment (boP)
               of the world in which every kind of
                                                           The outcome of the total transactions of an
               current transactions is shown—basically
                                                           economy with the outside world in one year is
               this account is maintained by the central
                                                           known as the balance of payment (BoP) of the