State the meaning of autonomous and accommodating items, under Balance of Payments of India, with the help of an example.

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Accepted Answer

**Autonomous Items:** These are international economic transactions that take place due to some economic motive like profit maximisation. They are independent of the state of BOP account and are also known as 'above the line items'.

*Example:* A foreign company investing in India to earn profit, or merchandise exports/imports of goods.

**Accommodating Items:** These are transactions undertaken to cover deficit or surplus in autonomous transactions. They are compensating capital transactions meant to correct disequilibrium and are known as 'below the line items'.

*Example:* Drawing down foreign exchange reserves to finance a current account deficit, or borrowing from IMF to cover BOP deficit.