Economics • Indian EconomyHard
Analyze the composition of India's Balance of Payments accounts. Which of the following specific economic transactions is correctly classified under the Current Account rather than the Capital Account?
A. External commercial borrowings raised by domestic corporate entities in international capital markets
B. Foreign direct investment equity inflows into manufacturing joint ventures
C. Private transfer payments such as remittances sent by nonresident workers abroad✓ Correct Answer
D. Portfolio investments in domestic equity and debt securities by foreign institutional investors
💡 Solution & Explanation
The current account records transactions relating to trade in goods and services, primary income, and secondary income, which includes private remittances and grants. External commercial borrowings, foreign direct investment, and portfolio investments alter international financial assets and liabilities and are therefore classified under the capital account. Remittances represent unrequited transfers without creating future repayment liabilities. Monitoring current account deficits is crucial for currency stability.
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