Question

If Toyota Company, establishes a factory in India, this will be recorded as balance of payment in the section of:
a Capital account inflow
b Current account
c Official financing
d invisible account

Answer 1

Answer:

A

Explanation:

a Capital account flow

Answer 2

Option a is the correct answer.

If Toyota Company, establishes a factory in India, this will be recorded as balance of payment in the section of Capital account inflow.

1. This is considered as foreign investment i.e. foreign investment by foreign companies in India.
2. Foreign investment is also of two kinds:

• portfolio investment
• foreign direct investment

The above example is of foreign direct investment as foreign company Toyota has set up a factory in India.