Difference between Balance of Trade and Balance of Payment

Basis of Difference		Balance of Trade (BOT)		Balance of  Payment (BOP)
1. Definition		Balance of trade may be defined as difference between export and import of goods and services.		Balance of payment is flow of cash between domestic country and all other foreign countries. It includes not only import and export of goods and services but also includes financial capital transfer.
2. Formula		BOT = Net Earning on  Export - Net payment for imports		BOP = BOT + (Net Earning  on foreign investment - payment made to foreign investors) + Cash  Transfer + Capital Account +or - Balancing Item or  BOP = Current Account + Capital Account  + or - Balancing item ( Errors and omissions)
3. Favourable  or  Unfavourable		If export is more than  import, at that time, BOT will be favourable. If import is more than export, at that time, BOT will be unfavourable.		Balance of Payment will be  favourable, if you have surplus in current account for paying your all  past loans in your capital account. Balance of payment will be unfavourable, if you have current account deficit and you took more loan from foreigners. After this, you have to  pay high interest on extra loan and this will make your BOP  unfavourable.
4. Solution of Unfavourable  Problem		To Buy goods and services  from domestic country.		To stop taking of loan  from foreign countries.
5. Factors		Following are main factors  which affect BOT a) cost of production b) availability of raw materials c) Exchange rate d) Prices of goods manufactured at home		Following are main factors  which affect BOP a) Conditions of foreign lenders.  b) Economic policy of Govt.  c) all the factors of BOT
6. Meaning of Debit and  Credit		If you see RBI' Overall  balance of payment report, it shows debit and credit of current account.  Credit means total export of different goods and services and debit means total import of goods and services in current account.		Credit means to receipt and earning both current and capital account and debit means total outflow of cash both current and capital account and difference between debit and credit will be net balance of payment.