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    Question

    Which of the following is a component of Current

    Account of Balance of Payment?
    A FDI Correct Answer Incorrect Answer
    B FPI Correct Answer Incorrect Answer
    C Interest payment on loan Correct Answer Incorrect Answer
    D Loan from World Bank Correct Answer Incorrect Answer
    E External Commercial borrowing (ECB) Correct Answer Incorrect Answer

    Solution

    Interest payment on loan comes under Current Account but loan itself (principle) comes under Capital Account. Current account- Export and imports of both goods and service, income from profit, interest and dividend, remittances, donation, gifts Capital Account- investment (FDI, FPI), Loan (Sovereign loan or External Commercial Borrowing), NRI accounts (FCNR) ECB or External Commercial Borrowing allows companies to raise capital from abroad in foreign currency. It is also a kind of loan and written under Capital Account. 

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