With reference to the Indian economy, consider the following statements:
- A share of the household financial savings goes towards government borrowings.
- Dated securities issued at marked-related rates in auctions form a large component of internal debt.
Which of the above statements is/are correct?
[UPSC Civil Services Exam – 2022 Prelims]
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (c)
Explanation:
Household financial savings
- It refers to currency, bank deposits, debt securities, mutual funds, pension funds, insurance, and investments in small savings schemes.
- The total of these savings is referred to as gross household financial savings.
- Once financial liabilities, including loans from banks, non-banking financial companies (NBFCs), and housing finance companies, are subtracted from gross savings, what remains is referred to as net household financial savings.
- A share of household financial savings goes to government borrowings, as part of public accounts of India. It mainly consists of provident fund. Hence, Statement 1 is correct.
Dated Government Securities
- It is government securities or bonds which are long-term, the tenor ranging from 5 years to 30 years.
- These have a fixed or floating coupon (or interest rate) associated with them which are paid on the face value at fixed intervals.
- The securities can be issued by both the centre and the state governments to mobilise funds.
- The government issues these funds to finance a fiscal deficit.
- Dated securities mean regular government bonds, whereas T-bills are considered separately.
- Dated securities issued at market-related rates comprise a large share of internal debt. Hence, Statement 2 is correct.
