2023 · Q26
An Indian businessperson buys shares in a British car company. This transaction will be reflected in:
indian-polity-economyfiscal-external
- ABalance of Trade, but not in Balance of Payments.
- BBalance of Payments, but not in Balance of Trade.
- Cboth Balance of Payments and Balance of Trade.
- Dneither Balance of Payments nor Balance of Trade.
Explanation
Buying shares in a British car company is a capital-account transaction, an investment abroad by an Indian resident. The Balance of Payments records all economic transactions with the rest of the world, including capital flows, whereas the Balance of Trade covers only the trade in goods. The purchase therefore appears in the Balance of Payments but not in the Balance of Trade. Hence option B.