The correct option is 1, 2 and 3 only.
Explanation
The Balance of Payments (BoP) is a systematic record of all economic transactions between residents of a country and the rest of the world. It is primarily divided into two accounts: the Current Account and the Capital Account. The Current Account records transactions involving the export and import of goods and services, as well as unilateral transfers. The Capital Account records transactions that alter the assets or liabilities of the country, such as loans and investments.
Statement-wise Analysis:
- 1. Export of goods: Included.
Exports and imports of tangible goods (merchandise) form the "visible trade" component of the Current Account. - 2. Import of services: Included.
Trade in services (intangibles such as software, tourism, banking, and shipping) forms the "invisible trade" component of the Current Account. - 3. Remittances and grants: Included.
These are classified as Unilateral Transfers (or Transfer Payments) within the Current Account. They represent receipts or payments for which no goods or services are provided in return (e.g., gifts, donations, and workers' remittances). - 4. External Commercial Borrowings (ECB): Not Included.
ECBs represent loans obtained by Indian entities from non-resident lenders. Since borrowing creates a repayment obligation (liability), it is classified under the Capital Account (specifically under Debt flows), not the Current Account.
Key Takeaway:
The Current Account captures the flow of goods, services, and income (non-debt, non-asset creating flows), whereas the Capital Account captures flows that change the national balance sheet regarding assets and liabilities (e.g., FDI, FII, Loans).