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Economy2013
Which of the following constitute a Capital Account? 1. Foreign Loans 2. Foreign Direct Investment 3. Private Remittances 4. Portfolio Investment Select the correct answer using the codes given below:

Explanation

The correct option is 1, 2, and 4, as these items are components of the capital account in the Balance of Payments (BOP). The capital account records financial transactions that involve ownership changes in assets and liabilities, including foreign loans (1) and foreign direct investment (2), which directly alter the financial position of a country's assets and liabilities. Portfolio investment (4), which includes investments in financial assets like stocks and bonds, also contributes to capital flows and is recorded in the capital account. In contrast, private remittances (3) reflect current transfers and are classified under the current account, hence not part of the capital account. This distinction is crucial for understanding the structure of a country’s economic interactions on a global scale, a key area covered in UPSC syllabus materials.

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