Classify the following items as belonging to the Current Account or the Capital Account of India's Balance of Payments: (i) Export of textiles to the USA (ii) A loan taken from the World Bank (iii) Tourism receipts from foreign visitors (iv) FDI inflow into an Indian company (v)

Question

Classify the following items as belonging to the Current Account or the Capital Account of India's Balance of Payments: (i) Export of textiles to the USA (ii) A loan taken from the World Bank (iii) Tourism receipts from foreign visitors (iv) FDI inflow into an Indian company (v) Import of crude oil (vi) Remittances sent home by NRIs working in the Gulf.

Accepted Answer

(i) **Export of textiles to the USA** — visible trade → **Current Account**.
(ii) **Loan from the World Bank** — an external borrowing that creates a liability → **Capital Account**.
(iii) **Tourism receipts from foreign visitors** — an invisible (services) receipt → **Current Account**.
(iv) **FDI inflow into an Indian company** — investment creating a lasting ownership interest, a capital flow → **Capital Account**.
(v) **Import of crude oil** — visible trade → **Current Account**.
(vi) **NRI remittances** — a current (unilateral) transfer, no return expected → **Current Account**. …

Q.Classify the following items as belonging to the Current Account or the Capital Account of India's Balance of Payments:

Concept understanding — Balance of Payments and its Components

Q.Classify the following items as belonging to the Current Account or the Capital Account of India's Balance of Payments:

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