Which of the following is not a component of current account in balance of payment?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Offshore funds
The balance of payments has two accounts. The current account records trade in goods and services and transfer payments, dealings that leave no claim to be settled later. The capital account records transactions in assets, such as borrowing, lending and investment. Offshore funds are pools of investment money held outside the country, so money moving into or out of them changes what residents own abroad and belongs to the capital account.
The other three are current account items:
Trade in services — shipping, insurance, software and the rest, the invisibles counterpart of trade in goods.
Net factor income — income earned abroad on labour and capital, a payment for a service rendered.
Gifts, remittances and grants — transfer payments, received without anything given in return.
NCERT: Introductory Macroeconomics — Chapter 6: Open Economy Macroeconomics (2025-26)
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