Which of the following statements is/are correct regarding the Balance of Payments (BoP)?
1. The current account measures the transfer of real resources (goods, services, income and transfers) between an economy and the rest of the world.
2. The capital and financial account reflects the net changes in financial claims on the rest of the world.
3. The compilation and dissemination of BoP data is the prime responsibility of the Reserve Bank of India (RBI).
Select the correct answer using the code given below:
1 only
1 and 2 only
1 and 3 only
1, 2 and 3
• The Balance of Payments (BoP) statistics systematically summarize, for a specific period, the economic transactions of an economy with the rest of the world. The compilation and dissemination of BoP data is the prime responsibility of the Reserve Bank of India RBI.
• The BoP can be broadly divided into two accounts, namely (A) current account, and (B) capital and financial account.
• The current account measures the transfer of real resources (goods, services, income and transfers) between an economy and the rest of the world. The capital and financial account reflects the net changes in financial claims on the rest of the world.
• The current account is further sub-divided into merchandise account and invisibles account. The merchandise account consists of transactions relating to exports and imports of goods. In the invisible account, there are three broad categories, namely (A) non-factor services, such as travel, transportation, insurance and miscellaneous services; (B) transfers which do not involve any value in exchange; and (C) income which includes compensation of employees and investment income.
• The capital account can be broadly broken up into two categories, namely (A) non-debt flows, such as direct and portfolio investments; and (B) debt flows, such as external assistance, commercial borrowings, non-resident deposits, etc. The sum of the current account and capital account indicates the overall balance, which could either be in surplus or in deficit. The movement in overall balance is reflected in changes in the international reserves of the country.
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