Question

Distinguish between ‘current transfers’ and ‘capital transfers.’

Answer 1

	Current Transfers	Capital Transfers
1.	These are payments made by individuals, enterprises, and the government out of their current income.	These are payments made by individuals, enterprises, and the government out of their past savings or accumulated wealth.
2.	The purpose of current transfers is to support consumption expenditure by the recipients.	The purpose of capital transfers is to assist the recipients in capital formation or asset creation.
3.	These transfers do not lead to the creation of any physical or financial asset.	These transfers result in the creation or restoration of capital assets by the recipients.
4.	Examples include scholarships, unemployment benefits, donations, and old-age pensions.	Examples include payments for the reconstruction of property damaged in floods or foreign aid after natural calamities like earthquakes.
5.	Current transfers are generally regular and part of the routine income-expenditure cycle.	Capital transfers are usually one-time in nature and made in response to specific events like disasters.