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?

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2

Explanation:

Both statements are correct.

  • Household financial savings refer to currency, bank deposits, debt securities, mutual funds, pension funds, insurance, and investments in small savings schemes. A share of these savings goes towards government borrowings, which forms a part of the government’s internal debt.
  • Dated securities are issued at market-related rates in auctions and form a large component of internal debt. The Central Government Debt includes all liabilities of the Central Government contracted against the Consolidated Fund of India, which is classified into internal and external debt. Marketable debt, such as Government dated securities and Treasury Bills, is issued through auctions.

Therefore, the correct answer is 3. Both 1 and 2.

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