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 ?

QUESTION

Medium

Economy

Prelims 2022

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 market-related rates in auctions form a large component of internal debt;

Which of the above statements is/are correct ?

Select an option to attempt

Explanation

Household savings and government borrowings: A portion of household financial savings in India does indeed go towards government borrowings

Government Debt Instruments: The government raises funds through various debt instruments like bonds and treasury bills. These instruments offer a return on investment to individuals who purchase them. Savings and Investments: When households save money, they might invest it in these government debt instruments through banks or other financial institutions. This provides a source of funding for the government while offering a return to the investors (savers).

Dated securities and internal debt: Dated securities are a major component of India's internal debt. These are essentially government bonds issued at market-determined interest rates through auctions. Investors, including households, banks, and financial institutions, can participate in these auctions and purchase dated securities.

Hence, both statements are correct.

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