Which of the following constitute Capital Accounts? 1. Foreign Loans 2. Foreign Direct Investment 3. Private Remittances 4. Portfolio Investment Select the correct answer using the codes given below.

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 [1]. Key components of the capital account include foreign investments, such as Foreign Direct Investment (FDI) and Portfolio Investment (FPI), as well as various forms of borrowings or loans, including External Commercial Borrowings and trade credits [4]. These are considered capital flows because they involve changes in ownership of financial assets and liabilities. Conversely, private remittances are classified as unilateral transfers under the current account [1]. Remittances represent money sent by workers abroad for consumption or as gifts, which do not create a future liability or change asset ownership in the same way capital transactions do [3]. Therefore, items 1, 2, and 4 constitute the capital account.

Sources

1. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.27 Balance of Payment (BoP) > p. 107
2. [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > IRVE > p. 487
3. [3] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 6: Open Economy Macroeconomics > Balance on Capital Account > p. 88
4. [4] https://www.rba.gov.au/education/resources/explainers/the-balance-of-payments.html