Q183
Indian EconomyExternal Sector & International Organisations
Which of the following constitutes a capital account in the Balance of Payments in India? 1. Foreign loans 2. Foreign Direct Investments 3. Remittances from abroad 4. Portfolio investment
- a.1, 2 and 3
- b.1, 2 and 4
- c.2, 3 and 4
- d.1, 2, 3 and 4
Answer: (B) 1, 2 and 4
The capital account of the Balance of Payments records transactions that change a country's foreign assets and liabilities: foreign investment (both FDI and portfolio investment), loans (external assistance and commercial borrowings) and banking capital such as NRI deposits. Remittances from abroad are private transfers and belong to the current account, under "invisibles", along with trade in services and investment income. So items 1, 2 and 4 are correct and 3 is not. India is the world's largest recipient of remittances; the rupee is fully convertible on the current account (since 1994) but only partially on the capital account.