Question:
Suppose an Indian manufacturer of steel acquires a steel manufacturing unit in Europe. This type of transactions are recorded in which of the following?
Suppose an Indian manufacturer of steel acquires a steel manufacturing unit in Europe. This type of transactions are recorded in which of the following?
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FDI and portfolio investments → Capital Account. Goods/services → Current Account.
Updated On: Sep 9, 2025
- Current Account
- Capital Account
- Capital Market
- Net Invisibles
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The Correct Option is B
Solution and Explanation
Step 1: Recall the Balance of Payments (BoP) structure.
- Current Account: Includes trade in goods and services, income, and transfers.
- Capital Account: Records cross-border investments such as FDI (Foreign Direct Investment) and portfolio investments.
- Capital Market: Refers to domestic equity and debt markets, not BoP.
- Net Invisibles: Refers to services, remittances, and transfers, not investment in assets.
Step 2: Apply to the question.
Acquiring a steel manufacturing unit abroad is an example of FDI, which is recorded under the Capital Account.
Final Answer: \[ \boxed{\text{Capital Account}} \]
- Current Account: Includes trade in goods and services, income, and transfers.
- Capital Account: Records cross-border investments such as FDI (Foreign Direct Investment) and portfolio investments.
- Capital Market: Refers to domestic equity and debt markets, not BoP.
- Net Invisibles: Refers to services, remittances, and transfers, not investment in assets.
Step 2: Apply to the question.
Acquiring a steel manufacturing unit abroad is an example of FDI, which is recorded under the Capital Account.
Final Answer: \[ \boxed{\text{Capital Account}} \]
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