Rajendra explains the concept of a country's current account deficit to Vinay using an analogy of personal income and expenses. A current account deficit occurs when a country's imports exceed its exports. It means the country is spending more on foreign goods and services than it is earning from foreign sales. Specifically, the current account balance is calculated as exports minus imports, plus net income from overseas investments and transfers, such as remittances. If the current account is in deficit, then the country is a net debtor to the rest of the world.