With reference to the Capital Account in the Balance of Payments (BoP), consider the following statements: 1. The Capital Account records all capital transactions of an economy with the rest of the world, including external borrowings, foreign investments, and foreign currency deposits. 2. Unlike the Current Account, the Capital Account does not reflect a surplus or deficit at the end of the financial year. Which of the statements given above is/are correct? |ForumIAS

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: C

Notes:

Explanation:

The Capital Account includes capital transactions such as external lending/borrowing, FDI, portfolio investment, foreign currency deposits, and external bonds.
The Capital Account is not assessed in terms of surplus or deficit like the Current Account. It is used to balance the BoP alongside the current and reserve accounts.

Source: Indian Economy (Ramesh Singh)