Components of the Current Account (Balance of Payments) — UPSC Prelims PYQ...

With reference to Balance of Payments, which of the following constitutes/constitutes the Current Account?

1. Balance of trade
2. Foreign assets
3. Balance of invisibles
4. Special Drawing Rights

Select the correct answer using the code given below.

1. 1 only
2. 2 and 3
3. 1 and 3
4. 1, 2 and 4

Explanation

Option (c) is correct

• The Current Account of the Balance of Payments records transactions relating to goods, services, income, and transfers. It includes the balance of trade (exports and imports of goods) and the balance of invisibles (services, remittances, interest, etc.). In contrast, items such as NRI deposits, Special Drawing Rights (SDRs), and funds held in foreign countries are recorded under the capital account, as they involve financial assets and liabilities.

Answer: (c) 1 and 3; Difficulty Level: Easy