Civil Services Prep

Prelims 2013 · Economy · Question 6

Which of the following constitute Capital Account?<br/>1. Foreign Loans<br/>2. Foreign Direct Investment<br/>3. Private Remittances<br/>4. Portfolio Investment<br/><br/>Select the correct answer using the codes given below:

  1. 1, 2 and 3
  2. 1, 2 and 4
  3. 2, 3 and 4
  4. 1, 3 and 4

Answer

1, 2 and 4

  1. Foreign Loans – These create external liabilities/assets and are recorded in the Capital/Financial Account of BoP. Verdict: Correct.

  2. Foreign Direct Investment (FDI) – FDI is an investment flow affecting ownership of assets and is part of the Capital/Financial Account. Verdict: Correct.

  3. Private Remittances – These are unilateral transfers with no asset-liability change, so they come under the Current Account. Verdict: Incorrect.

  4. Portfolio Investment – Purchase/sale of financial assets like shares and bonds is included in the Capital/Financial Account. Verdict: Correct.

Hence, items 1, 2 and 4 constitute Capital Account.

  1. The artificially fixed rupee-sterling exchange rate prescribed by the Hilton-Young Commission (1926) was…
  2. In what way(s) does the Vizhinjam International Seaport represent a structural shift in India's maritime trade…
  3. Which of the following is/are the most significant implication(s) of obtaining Oeko-Tex certification for Eri…
  4. Consider the following statements with reference to the Sagarmala Programme of the Government of India : I.…
  5. An e-commerce revenue model where the seller has control over pricing but doesn't keep products in stock and…
  6. Which one of the following correctly represents the three key sub-indices of the Financial Inclusion Index…