The Indian government imports 22 Rafael planes from France. In which sub-account and on which side of the Balance of Payments account this transaction will be recorded?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Current account on the debit side.
The import of goods (like Rafael planes) involves payment to a foreign country — in this case, France.
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The Current Account of the Balance of Payments (BoP) records all transactions of goods, services, income, and transfers between residents and non-residents.
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Since Rafael planes are goods imported, it will be recorded under the “Merchandise Trade” (Visible Items) section of the Current Account.
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Because India is making a payment to France (foreign exchange outflow), it will appear on the Debit side of the BoP.