Suppose an Indian manufacturer of steel acquires a steel manufacturing unit in Europe. This type of transactions are recorded in which of the following.

Capital Account

The correct answer is Option (2) → Capital Account

When an Indian manufacturer acquires a steel manufacturing unit in Europe, it involves a cross-border investment in physical assets, which is categorized as Foreign Direct Investment (FDI). Such transactions lead to a change in ownership of assets between residents of different countries. In the Balance of Payments (BoP), all financial transactions that result in changes in the ownership of assets—whether it's investments abroad by Indian entities or foreign investments into India—are recorded under the Capital Account.