With reference to the Indian economy, consider the following statements :
- 1.A share of the household financial savings goes towards government borrowings.
- 2.Dated securities issued at market-related rates in auctions form a large component of internal debt.
Which of the above statements is/are correct ?
Show answer
Answer: C. Statement 1 is correct: households deposit savings in banks, insurance and small savings schemes, and a part of this money is invested in government securities, so it funds government borrowing. Statement 2 is correct: dated securities sold through auctions at market rates are the largest part of the Centre's internal debt. So both.
Watch for: Students think households do not lend to the government, forgetting the indirect route through banks and small savings.
Why the other options are wrong
- A. Wrong because statement 2 is also correct.
- B. Wrong because statement 1 is also correct.
- D. Wrong because both statements are correct.
Source to check: Ministry of Finance, Status Paper on Government Debt; Union Budget, Receipt Budget (Internal Debt); RBI Annual Report
Answer from the official UPSC key. Written and fact-checked by AI against the official key. Spotted a mistake? Report it.