UPSC CSE Prelims
Question 52
Which of the following constitute Capital Account?
- Foreign Loans
- Foreign Direct Investment
- Private Remittances
- Portfolio Investment
Select the correct answer using the codes given below.
View correct answer and explanation
Correct answer: B
Correct Option: B
Explanation: Foreign loans, direct investment and portfolio investment are capital/financial inflows; private remittances are classified as current transfers in the current account.
Statement/Pair-wise Analysis:
Statement/Item 1: Correct - Cross-border loans create financial liabilities/assets in the financial account.
Statement/Item 2: Correct - Foreign direct investment creates a longer-term ownership stake and is a financial inflow.
Statement/Item 3: Incorrect - Personal remittances are secondary-income transfers in the current account.
Statement/Item 4: Correct - Portfolio investment in securities is recorded in the financial account.
Option-wise Analysis:
A: Incorrect - includes false item 3 and excludes true item 4.
B: Correct - selects all and only the accurate statements/pairs.
C: Incorrect - includes false item 3 and excludes true item 1.
D: Incorrect - includes false item 3 and excludes true item 2.
Review Note: Strict BPM6 terminology separates capital and financial accounts; exam usage commonly groups FDI, portfolio flows and loans under the “capital account”.