Distinguish between:

(a) Current Account and Capital Account.

(a) Import Substitution and Export Promotion.

(a) Current Account consists of two sub-groups (a) Merchandise or the Trade Account (b) Invisible Account. In the trade or merchandise account, only transactions relating to physical goods are entered. The invisible account comprises the services account. The services account records all the services rendered and received by residents of the nation. It includes banking and insurance charges, interest and loans, tourist's expenditure, transport charges etc.

Capital Account : Capital Account deals with the financial transactions of all kinds of short term and long-term international capital transfers. It deals with the payments of debts at international level. Main terms of capital account are listed below.

(a) Private loans, (b) Movement of banking capital, (c) Official capital transactions, (d) Reserve monetary gold and special drawing rights (SDR), (e) Gold movement, (f) Miscellaneous.

(b) Import Substitution and Export Promotion:

Ans. Import Substitution : It implies indegenous production of raw material, intermediate goods and final consumer and capital goods that had been imported. Import substitution was the major objective of India's foreign trade policy during first fifteen years of economic planning. The progress of import substitution in the country has been quite satisfactory. Indigenous production of capital goods has also expanded very fast and the country became self sufficient in their production too. In order to protect the domestic industries, there were quantitative restrictions on imports. This was encouraged through tight control over imports and by keeping the tariffs very high.

Export Promotion : It is a multidimensional activity. Export promotion measures adopted by the government have embraced a number of areas like prodcution for export, quality control, packaging, export credit and finance, export incentives and assistance, export marketing etc.