Which of the following is not included in the Capital Account of the

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

Foreign Direct Investment

Commercial Borrowing

Invisibles

External Assistance

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC CDS-2 – 2024

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The correct option is C. The question asks which item is *not* included in the Capital Account of a country’s Balance of Payments (BoP).

The Balance of Payments (BoP) is a summary of all economic transactions between a country and the rest of the world over a period of time. It is divided into two main accounts: the Current Account and the Capital Account (sometimes including a Financial Account).
– The **Current Account** records trade in goods (visibles), services (invisibles), income (investment income, compensation of employees), and current transfers (remittances, grants). “Invisibles” refers to services, income, and current transfers.
– The **Capital Account** (or Capital and Financial Account combined) records capital transfers and transactions involving financial assets and liabilities. This includes Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), loans (commercial borrowing, external assistance), and banking capital.

Options A (Foreign Direct Investment), B (Commercial Borrowing), and D (External Assistance) are all types of financial transactions or capital flows that are recorded in the Capital Account (or Financial Account, which is part of the broader Capital and Financial Account structure in modern BoP presentations). Option C (Invisibles) is a component of the Current Account, specifically related to trade in services, income, and current transfers. Therefore, “Invisibles” are not included in the Capital Account.

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