UPSC Prelims 2020 Question:

In the context of the Indian economy, non-financial debt includes which of the following?

1. Housing loans owed by households 
2. Amounts outstanding on credit cards 
3. Treasury bills
   
   

Select the correct answer using the code given below:

Explanation: 

• Financial debt includes debt of those institutions that borrow many for the sole purpose of relending. Non-financial debt is the debt issued by non-financial institutions such as government, household or a business not engaged in the financial sector. The non-financial sector includes entities such as corporations, small businesses, manufacturers, and many other types of companies.
  
  

• Non-financial debt includes household or commercial loans. So, point 1 is correct.
  
  

• Credit card debt qualifies as non-financial because it is not used for relending purpose. So, point 2 is correct.
  

• Similarly, treasury bills are issued by the government and are also regarded as non-financial debt. So, point 3 is correct.
  
  

Therefore, option (4) is the correct answer.

Subject: Economics | Public Finance