Which of the following are the components of current Account?
(A) Trade in Services
(B) Trade in Goods
(C) Investment
(D) External borrowings
(E) External Assistance
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A) & (B) Only
The current account records trade in goods and services and transfer payments. The capital account records dealings in assets, such as investment and loans.
(A) Trade in Services — Correct. Services such as shipping, banking, tourism and software are bought and sold across borders. This trade is part of the current account.
(B) Trade in Goods — Correct. Exports and imports of goods are the main item of the current account. Their difference is the balance of trade.
(C) Investment — Incorrect. Foreign investment means buying shares or firms in another country. It is a purchase of assets, so it is recorded in the capital account.
(D) External borrowings — Incorrect. A loan taken from abroad must be repaid later. It is a capital account item.
(E) External Assistance — Incorrect. External assistance is help received from foreign governments and international bodies. It is also recorded in the capital account.
NCERT (2026-27): “6.1.1 Current Account Current Account is the record of trade in goods and services and transfer payments. Figure 6.1 illustrates the components of Current Account. Trade in goods includes exports and imports of goods. Trade in services includes factor income and non-factor income transactions. Transfer payments are the receipts which the residents of a country get for ‘free’, without having to provide any goods or services in return. They consist of gifts, remittances and grants.… 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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