Question

. Answer with justification (mention whether there is any condition that is driving your answer: a statement can be true under some condition and at the same time uncertain under some other condition). (True, False or Uncertain):

The Indian subsidiary of a Japanese car company sells a car, manufactured in Chennai, to an Indian living in Mumbai – this transaction would enter positively in the accounts of Indian Current Account.

Answer 1

The answer is

False.

Yet the car is produced in India, but the ownership of the car is of that Japanese Car Company (JCC). When it is bought by an Indian, the ownership of the car is transferred from the JCC in Japan to the Indian (suggesting an import), and hence, the current account will record it as a debit in the account. Hence, the transaction would pose a negative sign in the BOP, and would not enter positively in the accounts of Indian current account.