question_answer

Distinguish (a) between current account and capital account, and (b) between autonomous transactions and accommodating transactions of balance of payments account.

Answer:

(a)
	Current Account BOP		Capital Account BOP
(1)	It records export and imports of goods and services and current transfer.	(1)	It records all such transactions between residents of country the world which causes a change in the ownership of the assets.
(2)	Transactions of current account does not affect asset liability status of the country in relation of rest of the world	(2)	Transactions of capital account affect the asset liability status of the country in relation to rest of the world.
(3)	Current account transactions impact capital account transactions, Example: Deficit on current account often leads to borrowing.	(3)	Capital account transactions impact current account transactions. Example: FDI leads to factor income to rest of the world.
(4)	Principal components of current account BOP are: (i) expert and import of goods (ii) expert and import of services, and (iii) current transfers	(4)	Principal components of capital account BOP are: (i) borrowing and (ii) foreign investment
(b)
	Autonomous transactions		Accommodating transactions
(1)	Autonomous transactions refer to such BOP transactions which are undertaken for consideration of profit.	(1)	Accommodating transactions are free from the considerations of profit.
(2)	Autonomous items are the cause of BOP imbalance (BOP surplus or BOP deficit)	(2)	Accommodating items are meant to restore BOP balance.
(3)	Autonomous items may involve the movement of goods across the borders (like export and import of consumer goods or capital good)	(3)	Accommodating items do not involve the movement of goods across the borders. These items only involve the movement of official reserves with the RBI
(4)	Autonomous items are classified as above the line items of BOP.	(4)	Accommodating items are classified as ?below the line? items of BOP.