CBSE 2025, Compartment, Set 1

Question

As per the statement given by the Governor of Reserve Bank of India (RBI) dated $10^{th}$ August 2023:
"The inflows from net commercial borrowings have been US $ 6.0 billion during April - June 2023."
Identify, the sub-account and the side of Balance of Payments where the above stated transactions would be recorded. State valid reasons in support of your answer.

Edvaya · Accepted Answer

The correct answer is Subjective. **Sub-account:** Capital Account. **Side:** Credit Side (+). **Reasoning:** 1. Commercial borrowings from abroad result in an increase in the financial liabilities of the country towards the rest of the world. Since it creates a liability or affects the asset-liability status of the country, it is recorded in the **Capital Account**. 2. Net commercial borrowings represent an inflow of foreign currency (funds coming into India). According to the rules of Balance of Payments accounting, all inflows of foreign exchange are recorded on the **Credit side**.

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Economics > Introductory Macroeconomics > Balance Of Payments

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