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 d

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Q: 10 (IAS/2022)
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_subject: 

Economics

question_exam: 

IAS

stats: 

0,266,163,78,64,266,21

keywords: 

{'securities': [0, 0, 0, 1], 'borrowings': [0, 2, 0, 3], 'indian economy': [0, 3, 3, 5], 'internal debt': [0, 0, 1, 0], 'financial savings': [0, 0, 0, 1], 'market': [0, 0, 1, 0], 'auctions': [0, 0, 0, 1], 'rates': [0, 0, 1, 0], 'household': [0, 1, 1, 6]}

Both the statements are correct.

Explanation:

  1. Household financial savings in India can be channelized into various investment options such as bank deposits, mutual funds, insurance products, equities, government securities, etc. Government securities, which are issued by the central and state governments, are one of the preferred investment options for risk-averse investors. A share of the household financial savings goes towards government borrowings, which forms a part of the government's internal debt.

  2. Dated securities are long-term debt instruments that are issued by the government to finance its fiscal deficit. These securities are issued at market-related rates in auctions and form a large component of the government's internal debt. Other components of the government's internal debt include treasury bills, small savings, provident funds, and other market borrowings.

Hence, both statements are correct.


Preparing for Future Exams: Learning from the Analysis of Past Questions

Topics:

  • Indian economy
  • Government borrowing
  • Household financial savings
  • Dated securities
  • Internal debt
  • Market-related rates

Sources:

  • Indian Economy by Ramesh Singh
  • Macroeconomics by Dornbusch and Fischer
  • Indian Economy by Uma Kapila
  • NCERT Macro Economics textbooks (Class XII)

NCERT Chapters:

  • Chapter 2: Money and Banking (Class XII)
  • Chapter 3: Income Determination (Class XII)
  • Chapter 4: Government Budget and the Economy (Class XII)
  • Chapter 5: Balance of Payments (Class XII)

Related Concepts:

  • Fiscal policy
  • Monetary policy
  • Budgetary deficits and its financing
  • Public debt
  • Financial markets and instruments
  • Savings and investment in the economy