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IAI Actuarial Core Principles · Business Economics · Balance of payments and exchange rates

Which of the following transactions would be recorded as a credit item in the current account of India's balance of payments?

A foreign tourist paying for a hotel in Jaipur is a credit in India's current account, because it is an export of services bringing in foreign exchange. Imports and interest paid abroad are debits, and share or factory purchases are financial account items.

  1. AAn Indian firm importing crude oil from Iraq
  2. BAn Indian resident paying interest on a loan to a foreign bank
  3. CA US company purchasing shares in an Indian listed company
  4. DA foreign tourist paying for a hotel stay in JaipurCorrect
  5. An Indian company buying a factory abroad

Explanation

Credits in the current account record receipts from abroad for goods, services, income and transfers. A tourist's hotel payment is an export of services, so it is a credit. Oil imports and interest paid abroad are debits, while share purchases and factory purchases belong in the capital or financial account.

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