CA Foundation · Business Economics · International Trade
Which of the following will be recorded as a debit item in the current account of India's balance of payments?
Payment of interest on external commercial borrowings to foreign lenders is a current account debit, because it is an outflow of investment income. Remittances and software exports are credits, and FDI inflow belongs to the capital or financial account.
- AReceipt of remittances from Indians working abroad
- BExport of software services to the USA
- CPayment of interest on external commercial borrowings to foreign lendersCorrect
- DInflow of foreign direct investment into an Indian company
Explanation
Interest paid to non-residents is a payment for investment income and so is a debit in the current account. Remittances received and service exports are credits. FDI inflow is a capital account (financial account) item, not a current account one.
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