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    Question

    Which of the following may result in deficit in Current

    Account?
    A Excessive import of electronics items Correct Answer Incorrect Answer
    B Excessive export of agriculture products Correct Answer Incorrect Answer
    C Huge outflow of Foreign Institutional Investment (FII) Correct Answer Incorrect Answer
    D Receiving huge remittance from abroad Correct Answer Incorrect Answer
    E Both a and c Correct Answer Incorrect Answer

    Solution

    Excessive import of any commodity will cause huge outflow of foreign currency from India, thus causing a Current Account Deficit. Same is true for outflow of FII. FII are short term foreign investment in IndiaтАЩs debt or equity market. These are very volatile and temporary in nature.┬а They may withdraw their investment overnight and invest in some other market for better return. ThatтАЩs why this is also called тАШHot MoneyтАЩ

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