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 is/are correct?
Explanation
Correct answer: (c) Both 1 and 2
Statement 1 is correct: Household financial savings parked in banks, life insurance, pension funds and small savings schemes form the primary pool that financial intermediaries invest into government debt instruments to fund public borrowing.
Statement 2 is correct: Internal debt accounts for more than 90% of the Central Government’s total public debt, and within that, market-auctioned dated G-Secs form the single largest component.