Which one of the following is NOT a part of the current account of a country's balance of payments?

The correct answer is - Portfolio Investment

Key Points

• Portfolio Investment
  • Falls under the capital account of a country's Balance of Payments (BoP).
  • Refers to investment in financial assets such as stocks and bonds by foreign investors.
  • Involves ownership without control, unlike foreign direct investment (FDI).
  • It does not affect the current account, which deals with trade and income flows.

Additional Information

• Current Account
  • Records the flow of goods, services, and income between a country and the rest of the world.
  • Main components include:
    • Export of Goods – Earnings from selling goods to other countries.
    • Import of Goods – Expenditure on purchasing goods from other countries.
    • Investment Income – Earnings from foreign investments (interest, dividends).
    • Transfers – One-way transfers such as remittances and foreign aid.
• Capital Account
  • Includes portfolio investment, foreign direct investment (FDI), and loans.
  • Represents movement of financial capital into and out of the country.
  • Key for financing current account deficits.