The fall in the current account deficit comes on the back of a lower merchandise trade deficit, the Reserve Bank of India said. India's current account deficit (CAD) fell to 13.4 billion dollar in January-March 2022 from 22.2 billion dollar in October-December 2021, according to data released by the Reserve Bank of India (RBI) on June 22. The deficit was 8.1 billion dollar in January-March 2021. In percentage terms, the CAD in January-March 2022 was 1.5 percent of GDP, down from 2.6 percent of GDP the previous quarter. "The sequential decline in CAD in Q4:2021-22 (January-March) was mainly on account of a moderation in trade deficit and lower net outgo of primary income," the central bank said. India's merchandise trade deficit fell to 54.5 billion dollar in the first quarter of 2022 from 59.8 billion dollar the previous quarter, helping bring down the CAD. On the services front, the trade surplus edged up marginally to 28.3 billion dollar from 27.8 billion dollar in October-December 2021. Also helping the current account deficit to moderate was a lower net outgo of primary income, which amounted to 8.4 billion dollar last quarter. In October-December 2021, the net outgo of primary income was 11.5 billion dollar. Primary income includes compensation of employees and investment income. While there was a decline in quarterly current account deficit, India's current account deficit for FY22 was at a three-year high of 38.7 billion dollar, thanks to the merchandise trade deficit nearly doubling to 189.5 billion dollar from 102.2 billion dollar in FY21. Y22 saw India's import bill rising on two accounts - higher imports following a recovery in economic activity as well as higher global commodity prices, including those of crude oil. In percentage terms, the CAD posted a deficit of 1.2 percent of GDP in FY22, up from 0.9 percent of GDP in FY21. The last time India's annual CAD was higher was in FY19, when it came in at 57.3 billion dollar.

Which of the following transactions are recorded by the "Current account" of BoP?

Both 1 and 2

The correct answer is option 4: Both 1 and 2

Current account records receipts and payments of transactions relating to visible items (goods), invisible items (services), unilateral transfers and income. 

• Export of jewellery from India to Belgium: This is a trade in goods and is recorded in the current account.
• Market research by an Indian company for an American company: This is a trade in services and is recorded in the current account.
• Inflow of foreign exchange due to sale of Indian land to a German company: This involves a capital asset and is recorded in the capital account, not the current account.