Which of the following are the components of current Account ?
(A) Trade in Services
(B) Trade in Goods
(C) External borrowings
(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) and (B) only
The Current Account in the Balance of Payments (BoP) consists of transactions related to trade in goods, trade in services, primary income, and transfers. The key components include:
- Trade in Goods (Merchandise Trade) → Includes exports and imports of physical goods.
- Trade in Services → Includes payments for services like tourism, banking, IT, etc.
- Primary Income → Includes income from investments (like interest, dividends).
- Secondary Income (Transfers) → Includes remittances, foreign aid in cash, etc.
Why not the other options?
- (C) External Borrowings, (D) External Borrowings, (E) External Assistance
- These belong to the Capital Account, not the Current Account.
- External borrowings and assistance refer to financial flows (loans, investments), which impact capital movement rather than trade in goods and services.
