Question

Which one of the following will be included in Capital Account of Balance of Payments of India?

Options

• Mohan received interest on his fixed deposit in a bank in Singapore.

• ABL Computers imported microprocessors from the USA for $ 3,60,000.

• Rush Ltd., a foreign car company, invested in India for production of cars.

• People from neighbouring countries spent money on medical treatment in India.

Answer 1

Rush Ltd., a foreign car company, invested in India for production of cars.

Explanation:

• A foreign company investing to set up production in India is foreign direct investment (sale of/transaction in real assets) and is recorded in the capital account.
• The other items are current-account transactions: Mohan’s interest is investment income, ABL’s purchase of microprocessors is an import of goods, and foreign patients’ payments are export of services.