The chart shows the components of the capital account, with an example under each box. Some boxes are marked P, Q, R and S.
Which of the following is correct?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → P – Direct investment; Q – Portfolio investment; R – External borrowings; S – External assistance
The examples under each box give the answer. FDI and equity capital are direct investment (P); FII and offshore funds are portfolio investment (Q).
Commercial borrowings and short-term debt are external borrowings (R). Government aid and multilateral loans are external assistance (S).
Note: A flow chart like the one on the parts of the capital account packs a whole topic into one small space. Learn each box together with its examples.
NCERT (2026-27): “6.1.2 Capital Account … Fig. 6.2 classifies the items which are a part of capital account transactions. These items are Foreign Direct Investments (FDIs), Foreign Institutional Investments (FIIs), external borrowings and assistance.”
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