Analyze the components of India's Balance of Payments (BoP) accounts. Which of the following specific transactions is recorded under the 'Capital Account' of the balance of payments?

💡 Solution & Explanation

External commercial borrowings raised by domestic corporations from foreign financial markets are financial transactions that alter the foreign assets and liabilities of the country, thus being recorded under the capital account of the balance of payments. In contrast, software service exports, worker remittances, and profit repatriations are categorized under the current account as trade in services, secondary income, and primary income respectively. The capital account tracks foreign direct investment, portfolio flows, and external loans. A related international economic indicator is foreign exchange reserves, which absorb balance of payments imbalances.