Q. Which of the following transactions are classified as Capital Account transactions in the context of Balance of Payments?

1. An Indian importing an American gadget or software made by an American company.
2. An American entity importing Indian steel or engaging an Indian IT company to create software.
3. An Indian firm investing money in the US to build a new company there.
4. An Indian buying stocks on an American exchange.

Select the correct answer using the codes given below:
Answer: Only 3 & 4
Notes: Capital Account includes cross-border investments such as an Indian firm establishing a company in the US (3) and an Indian buying stocks in the US (4). Import of goods or services, as in statements 1 and 2, are recorded in the Current Account, not Capital Account. Hence, only 3 and 4 are correct.