Consider the following statements :
- I.Capital receipts create a liability or cause a reduction in the assets of the Government.
- II.Borrowings and disinvestment are capital receipts.
- III.Interest received on loans creates a liability of the Government.
Which of the statements given above are correct?
Show answer
Answer: A. Statement I is correct: capital receipts either create a liability (like borrowing) or reduce assets (like disinvestment). Statement II is correct: borrowings and disinvestment are both capital receipts. Statement III is wrong: interest received on loans is a revenue receipt; it creates no liability and does not reduce assets. So I and II.
Watch for: Recovery of a loan is a capital receipt, but the interest on that loan is a revenue receipt.
Why the other options are wrong
- B. Wrong because Statement III is incorrect.
- C. Wrong because Statement III is incorrect.
- D. Wrong because Statement III is incorrect.
Source to check: NCERT Class 12 Introductory Macroeconomics, chapter 'Government Budget and the Economy'
Answer from the official UPSC key. Written and fact-checked by AI against the official key. Spotted a mistake? Report it.