With respect to the inflow of remittances into India, consider the following statements: 1. The remittances are accounted under the capital account of the Balance of Payments (BoP). 2. India receives the world's highest remittances, after China. Which of the statements given above is/are correct?
With respect to the inflow of remittances into India, consider the following statements:
1. The remittances are accounted under the capital account of the Balance of Payments (BoP).
2. India receives the world's highest remittances, after China.
Which of the statements given above is/are correct?
Options
- a.
1 only
- b.
2 only
- c.
Both 1 and 2
- d.Correct answer
Neither 1 nor 2
Explanation
The Balance of Payments (BoP) keeps a record of all economic transactions of India with other countries on an annual basis. The BoP consists of two accounts- Current Account and Capital Account.
Current Account = Balance of Trade (BoT) + Balance of Invisible (BoI). BoT is calculated as (Exports- Imports) and it includes only the merchandise goods. Balance of Invisibles (BoI) includes the net of services, income and remittances.
The current account basically includes the trade in goods and services, as well as remittances. The capital account includes Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), External Commercial Borrowings (ECBs) etc.
India receives the world's highest remittances as shown in the graph below:
Top Remittance Receivers in 2018
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