Question

``Unilateral Transfers'' are recorded in which account of BOP?

• A. Capital Account
• B. Current Account
• C. Errors and Omissions
• D. None of these

Hint:

Current Account = Visible Trade (Goods) + Invisible Trade (Services) + Unilateral Transfers. Capital Account = Foreign Investments + Loans + Banking Capital + Reserves.

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
The Balance of Payments (BOP) is a systematic record of all economic transactions between residents of a country and the rest of the world. It has two main accounts: Current Account and Capital Account.

Step 2: Detailed Explanation:
Unilateral Transfers are one-sided transactions with no quid pro quo (no reciprocal transaction). Examples include: gifts, remittances sent by Indians working abroad, grants from foreign governments, and foreign aid.
These are recorded in the Current Account of the BOP under the sub-head ``Transfers''. The Current Account records trade in goods (Visible), trade in services (Invisible), and unilateral transfers.

Step 3: Final Answer:
``Unilateral Transfers'' are recorded in the Current Account of BOP.