Which of the following can be included in the current account of the balance of payments ? (i) Purchase of goods from abroad (ii) Sale of services abroad (iii) Workers’ remittances from aboard (iv) Sale of copyright to foreigners (v) Direct investment in equity capital Codes :
(i), (ii), (iii) and (iv)
The balance of payments has a current account, a capital account and a financial account. The current account records trade in goods, trade in services, primary income (such as wages and investment income) and secondary income or current transfers.
Purchase of goods from abroad is a merchandise import, a debit in the goods account, so (i) belongs to the current account. Sale of services abroad is an export of invisibles, a credit in the services account, so (ii) belongs as well.
Remittances sent home by residents working abroad are personal (private) transfers. They are current transfers, so (iii) belongs to the current account.
Sale of copyright to foreigners is a sale of intellectual property. Under the IMF's sixth Balance of Payments Manual (BPM6), receipts from licensing intellectual property are recorded as charges for the use of intellectual property, and the outright sale of copyrights on original works (such as software, books, films and music) is recorded within services, for example computer or audiovisual services. Either way the receipt is an export of services, so (iv) also belongs to the current account.
Direct investment in equity capital creates a lasting ownership interest in an enterprise abroad. It is a change in financial assets and liabilities, so (v) is recorded in the financial account (the capital account in India's presentation), not in the current account.
The items that can be included in the current account are therefore (i), (ii), (iii) and (iv).
Hence, (i), (ii), (iii) and (iv).
Similar Questions
In computation of balance of payments, overall balance of payments =
Which of the following is not one of the components of ‘International Reserve’ ?
Match the items of List – I with items in List – II and select a correct code :
List – I List – II a. Current Account i. Official Capital b. Capital Account ii. Reserves from foreign countries c. Unilateral Payments iii. Reparations d. Official Statement Account iv. Visible Exports and Imports Codes :
a b c d
Important Questions from Balance of payments (BOP)
Which of the following statements is correct?
Which of the following statements is INCORRECT?
Balance of Trade is measured as:
- If there is a balance of payments deficit then in a floating exchange rate system :
- Devaluation, will improve the balance of payment deficit, if sum of elasticity of exports and imports of the devaluing country is :
