UPSC Prelims 2022 Question:

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 are correct?

Explanation:

• 50.8% of households’ savings in FY18 were in financial assets, followed by physical assets (48.1%) and gold/silver ornaments (1.1%). Deposits with banks are the single largest form of households’ financial assets, followed by insurance funds, mutual funds and currency. As insurance companies and mutual/provident funds are key investors in government securities, a share of the household financial savings goes towards government borrowings. So, statement 1 is correct.
  
  

• Internal Debt comprises loans raised in the open market, compensation and other bonds, etc. It also includes borrowings through treasury bills including treasury bills issued to State Governments, Commercial Banks and other Investors, as well as non negotiable, non-interest-bearing dated securities issued to International Financial Institutions. So, statement 2 is correct.
  
  

Therefore, option (3) is the correct answer.

Subject: Economics| Indian Economy