BALANCE OF PAYMENT
December 2018, Paper-II
Question
Balance of Payment on capital account doesn’t include
a) government loans to foreign governments
b) net income transfers
c) balancing foreign direct investments
d) foreign portfolio investment
Answer B
Balance of Payment of any country is a systematic record of all economics transactions between its residents and the residents of the rest of the world in an accounting period. Balance of Payment has two major components viz. current account and capital account. The current account records a nation’s transactions with the rest of the world—specifically its net trade in goods and services, its net earnings on cross-border investments, and its net transfer payments The capital account is a record of the inflows and outflows of capital that directly affect a nation’s foreign assets and liabilities. Capital account consists of foreign investment, loans, banking capital and rupee debt services.