Autonomous and Accommodating Transactions
International economic transactions are called autonomous when transactions are made due to some reason other than to bridge the gap in the balance of payments, that is, when they are independent of the state of BOP. One reason could be to earn profit. These items are called 'above the line' items in the BOP. The balance of payments is said to be in surplus (deficit) if autonomous receipts are greater (less) than autonomous payments.
Accommodating transactions (termed 'below the line' items), on the other hand, are determined by the gap in the balance of payments, that is, whether there is a deficit or surplus in the balance of payments. In other words, they are determined by the net consequences of the autonomous transactions. Since the official reserve transactions are made to bridge the gap in the BoP, they are seen as the accommodating item in the BOP.
Which of the following is not an autonomous transaction of the balance of payments?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → official reserve transactions
Official reserve transactions are made to bridge the gap in the balance of payments. So they are the accommodating item, and all other items are autonomous.
Autonomous transactions are made for some other reason, such as earning profit. Exports, external commercial borrowings and foreign direct investment are made for such reasons, whatever the state of the balance of payments.
NCERT (2026-27): “Autonomous and Accommodating Transactions International economic transactions are called autonomous when transactions are made due to some reason other than to bridge the gap in the balance of payments, that is, when they are independent of the state of BoP. One reason could be to earn profit. These items are called ‘above the line’ items in the BoP. The balance of payments is said to be in surplus (deficit) if autonomous receipts are greater (less) than autonomous payments. Accommodating transactions (termed ‘below the line’ items), on the other hand, are determined by the gap in the balance of payments, that is, whether there is a deficit or surplus in the balance of payments. In other words, they are determined by the net consequences of the autonomous transactions. Since the official reserve transactions are made to bridge the gap in the BoP, they are seen as the accommodating item in the BoP (all others being autonomous).” |