Which of the following pairs is correctly matched?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Sale of shares of an Indian company to a foreign buyer – credit item on the capital account
Selling an asset to a foreigner brings foreign exchange into India. So a sale of shares is a credit item on the capital account.
Option (1) Repayment of a loan taken from abroad – capital inflow — Incorrect. Repaying a loan sends money out; it is a capital outflow.
Option (2) Receipt of a loan from abroad – capital outflow — Incorrect. A loan received brings money in; it is a capital inflow.
Option (3) Purchase of a foreign company by an Indian firm – credit item on the capital account — Incorrect. A purchase of assets abroad is a debit item.
Option (4) Sale of shares of an Indian company to a foreign buyer – credit item on the capital account — Correct. A sale of assets is a credit item.
NCERT (2026-27): “6.1.2 Capital Account … Purchase of assets is a debit item on the capital account. If an Indian buys a UK Car Company, it enters capital account transactions as a debit item (as foreign exchange is flowing out of India). On the other hand, sale of assets like sale of share of an Indian company to a Chinese customer is a credit item on the capital account. …” “Balance on Capital Account Capital account is in balance when capital inflows (like receipt of loans from abroad, sale of assets or shares in foreign companies) are equal to capital outflows (like repayment of loans, purchase of assets or shares in foreign countries). …” |