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Q17 (CDS-II/2024) Economy › External Sector & Trade › Balance of payments Answer Verified

Which of the following is not included in the Capital Account of the Balance of Payments of a country?

Result
Your answer: —  Â·  Correct: C
Explanation

The Balance of Payments (BoP) is divided into the Current Account and the Capital Account. The Capital Account records transactions that alter the assets or liabilities of a country, such as Foreign Direct Investment (FDI), Commercial Borrowings (including External Commercial Borrowings), and External Assistance (loans and grants) [3]. In contrast, 'Invisibles' are a primary component of the Current Account [3]. Invisibles include trade in services (like travel, transportation, and software), income (interest, profits, and dividends), and unilateral transfers such as remittances and gifts [4]. While FDI and loans represent capital flows that change the international investment position, invisibles represent the flow of value for current consumption or production and do not create future liabilities in the same manner [3]. Therefore, Invisibles are not included in the Capital Account.

Sources

  1. [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > IRVE > p. 487
  2. [3] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.27 Balance of Payment (BoP) > p. 107
  3. [1] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 6: Open Economy Macroeconomics > Balance on Current Account > p. 87
  4. [4] https://mospi.gov.in/sites/default/files/Statistical_year_book_india_chapters/Chapter%20No.4_0.pdf
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