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Prelims 2022 · Q10 · Public debt & securities

With reference to the Indian economy, consider the following statements :

  1. 1.A share of the household financial savings goes towards government borrowings.
  2. 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.