Which of the following is not included in the Capital Account of the Balance of Payments of a country?
- A.Foreign Direct Investment
- B.Commercial Borrowing
- C.Invisibles
- D.External Assistance
Correct answer
Explanation
The correct answer is C, Invisibles. Invisibles are part of the current account of the balance of payments, not the capital account. The balance of payments records all of a country's transactions with the rest of the world and has two main parts. The current account covers trade in goods (the visible items) and invisibles, which include services such as software and tourism, income such as interest and dividends, and transfers such as remittances sent home by Indians working abroad. The capital account, in India's usage, records flows that create assets or liabilities: foreign investment (FDI and portfolio), loans and borrowings, banking capital and other capital. Option A is wrong because foreign direct investment is a capital inflow and sits in the capital account. Option B is wrong because external commercial borrowing by Indian firms is a loan and so a capital account item. Option D is wrong because external assistance, the loans India gets from bodies such as the World Bank and from foreign governments, is also recorded in the capital account. Exam tip: current account = goods + invisibles (services, income, transfers); capital account = investment, loans, banking capital.
Practice Questions
View allPlan allocation in agriculture and irrigation as percentage of total plan outlay was highest in :
- A.Seventh Five-Year Plan
- B.Third Five-Year Plan
- C.First Five-Year Plan
- D.Second Five-Year Plan
Show answer
The First Plan (1951 to 1956) gave agriculture, community development and irrigation about a third of its outlay, the highest share in any Indian plan.
Read the full explanation →Which one among the following was the focus of the Twelfth Five-Year Plan?
- A.Sustainable and Inclusive Growth
- B.Social Justice and Equality
- C.Food, Work and Productivity
- D.Attainment of Self-reliance
Show answer
The Twelfth Five-Year Plan (2012-17) had the theme "Faster, More Inclusive and Sustainable Growth". It continued the inclusive-growth idea of the Eleventh Plan (2007-12), whose theme was "Towards Faster and More Inclusive Growth", and added sustainability as a stated goal.
Read the full explanation →The Nehru-Mahalanobis Strategy of Development was implemented for the first time by which one of the following Five-Year Plans?
- A.First Five-Year Plan
- B.Second Five-Year Plan
- C.Third Five-Year Plan
- D.Seventh Five-Year Plan
Show answer
The Second Plan (1956–61) was built on the model prepared by the statistician P. C. Mahalanobis, which gave priority to heavy and basic industries.
Read the full explanation →The Insolvency and Bankruptcy Board of India (IBBI) was established in the year
- A.2014
- B.2015
- C.2016
- D.2017
Show answer
The Insolvency and Bankruptcy Board of India was set up on 1 October 2016 under the Insolvency and Bankruptcy Code, 2016.
Read the full explanation →Consider the following statements : 1. An additional spending by the Government of ₹ X is likely to have less impact on income than an additional transfer of ₹ X to households. 2. An additional spending by the Government of ₹ X is likely to have less impact on income if it is not accompanied by an expansion in money supply. Which of the statements given above is/are correct ?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
Show answer
Government spending adds to income more than an equal transfer, and its effect is smaller when money supply is not expanded alongside it.
Read the full explanation →