BALANCE OF VISIBLE TRADE

abhishreshthaa

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BALANCE OF VISIBLE TRADE

Balance of visible trade is also known as balance of merchandise trade, and it covers all transactions related to movable goods where the ownership of goods changes from residents to non-residents (exports) and from non-residents to residents (imports).


The valuation should be on F.O.B basis so that international freight and insurance are treated as distinct services and not merged with the value of goods themselves.


Exports valued on F.O.B basis are the credit entries. Data for these items are obtained from the various forms that the exporters have fill and submit to the designated authorities. Imports valued at C.I.F are the debit entries.


Valuation at C.I.F. though inappropriate, is a forced choice due to data inadequacies. The difference between the total of debits and credits appears in the “Net” column. This is the ‘Balance of Visible Trade.’


In visible trade if the receipts from exports of goods happen to be equal to the payments for the imports of goods, we describe the situation as one of zero “goods balance.’


Otherwise there would be either a positive or negative goods balance, depending on whether we have receipts exceeding payments (positive) or payments exceeding receipts (negative).
 
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