Economics • Indian EconomyMedium
Consider the following components of India's Balance of Payments. Which item is recorded under the 'Capital Account'?
A. Export and import of software services and consulting fees
B. Unilateral remittances sent by citizens working abroad to families in India
C. External commercial borrowings and foreign direct investments✓ Correct Answer
D. Investment income earned on portfolio holdings abroad
💡 Solution & Explanation
External commercial borrowings and foreign direct investments are recorded under the capital account as they alter the international financial assets and liabilities of the country. Software exports and investment incomes form part of the current account. Unilateral remittances are categorized under current account transfer payments. Capital account transactions monitor financial flows that create future repayment claims or ownership shifts.
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