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Q44 (IAS/2020) Economy › Basic Concepts & National Income › Business finance basics Official Key

In the context of the Indian economy, non-financial debt includes which of the following ? 1. Housing loans owed by households 2. Amounts outstanding on credit cards 3. Treasury bills Select the correct answer using the code given below :

Result
Your answer: —  ·  Correct: D
Explanation

The correct answer is Option 4 (1, 2 and 3). In economics, non-financial debt refers to credit instruments issued by entities that are not financial intermediaries. This category encompasses debt incurred by households, non-financial corporations, and the government.

  • Housing loans (1) and Credit card outstandings (2): These represent consumer credit and mortgage debt owed by the household sector. Since households are non-financial entities, their borrowings are classified as non-financial debt.
  • Treasury bills (3): These are short-term debt instruments issued by the Government to meet fiscal requirements. The government is a non-financial borrower; hence, sovereign debt (T-bills, G-Secs) is a core component of non-financial debt.

Conversely, financial debt refers to the internal borrowing within the financial sector (e.g., banks borrowing from each other). Since all three items listed involve borrowing by the government and households, they collectively constitute non-financial debt.

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Q. In the context of the Indian economy, non-financial debt includes which of the following ? 1. Housing loans owed by households 2. Amount…
At a glance
Origin: Mostly Current Affairs Fairness: Low / Borderline fairness Books / CA: 0/10 · 6.7/10
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This is a classic 'Definition Application' question. It doesn't require memorizing a list from a book, but understanding the core macroeconomic definition of 'Non-Financial Sector' (Households + Govt + Corporates). If the borrower isn't a bank/intermediary, their debt is non-financial.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
Are housing loans owed by households included in non‑financial debt in the Indian economy?
Origin: Web / Current Affairs Fairness: CA heavy Web-answerable

Web source
Presence: 5/5
"Financial debt refers to the borrowing of funds by various entities, such as governments, corporations, and households, from financial institutions or other sources to finance their activities."
Why this source?
  • Defines financial debt to include borrowing by households, implying household loans (like housing) are financial rather than non‑financial.
  • Directly links households to the category of financial debt rather than non‑financial debt.
Web source
Presence: 5/5
"refers to the money borrowed by individuals or families to finance various expenses, such as housing, education, and consumer goods."
Why this source?
  • Specifically lists housing as an expense financed by money borrowed by individuals or families, placing housing loans under the described debt type.
  • Shows household borrowing for housing is treated as the consumer/household debt discussed in the article’s financial‑debt section.
Web source
Presence: 4/5
"Financial debt primarily involves borrowing between entities that are part of the financial system, and the purpose is often geared towards financial activities and investments***. Non‑financial debt, on the other hand, involves borrowing between entities not primarily involved in financial services,"
Why this source?
  • Explains the distinction: financial debt involves borrowing within the financial system, while non‑financial debt involves entities not primarily engaged in financial services.
  • This distinction supports that household housing loans (from financial institutions) belong to financial debt, not non‑financial debt.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > 1. In the context of the Indian economy, non-financial debt includes which of the following? > p. 284
Strength: 5/5
“• 1. Housing loans owed by households • 2. Amounts outstanding on credit cards • 3. Treasury bills Select the correct answer using the code given below: • (b) 1 and 2 only • (d) 1, 2 and 3 • (c) 3 only”
Why relevant

This snippet lists a multiple‑choice question that pairs 'Housing loans owed by households' and 'Amounts outstanding on credit cards' as candidate components of 'non‑financial debt', implying these household liabilities are treated as debt categories in that context.

How to extend

A student could take this framing and check standard sectoral debt definitions (household vs government) to see if household loans are classified under non‑financial/private debt rather than government debt.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > 16.18 Indian Economy > p. 486
Strength: 4/5
“• In 2019-20, ECBs remained the largest component of India's external debt, with a share of 38 per cent, followed by NRI deposits (23.2%). • In 2020-21, US dollar-denominated debt continued to be the largest component of India's external debt with a share of 53.9 per cent at the end of June 2020, followed by the Indian Rupee (31.6%), Japanese Yen (5.7%), SDR (4.5%) and Euro (3.5%). • Non-government debt is generally much higher than the government debt.”
Why relevant

States that 'Non‑government debt is generally much higher than the government debt', indicating a distinction between government/public debt and other (private/household) debt aggregates.

How to extend

Combine this with knowledge that housing loans are large household liabilities to infer they likely make up part of the non‑government (non‑financial/private) debt stock.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Govt. of India (Central Govt.) Total Debt/Liabilities = 1 + 2 + 3 + 4 > p. 162
Strength: 4/5
“• 1. Internal Debt[it is basically what Govt. of India borrows by issuing Debt Securities like Treasury Bills and Dated Securities in the domestic market. It is also called Domestic Market Borrowings]• 2. External Debt [It is basically borrowing from other Governments (bilateral debt) and Multilateral Agencies like World Bank, ADB etc. and FPI purchasing G-Secs]• 3. Public Account Liability [It includes National Small Savings Schemes like Public Provident Fund, Kisan Vikas Patra etc.]• 4. Off budget liabilities [Such financial liabilities of any corporate or other entity owned/controlled by the Central Government, which the Govt. has to repay or service from the Annual Financial Statement.] Internal Debt and external debt combined together is also called Public Debt (of Govt. of India) and it is contracted (on the security of) against the Consolidated Fund of India. • Components of Central Govt.”
Why relevant

Defines components of central government debt (internal, external, public account, off‑budget), clarifying that government/public debt is a separate category from other debts.

How to extend

Use this rule of separation to reason that loans not listed as government liabilities (e.g., household housing loans) would belong to non‑government/non‑financial debt aggregates.

Understanding Economic Development. Class X . NCERT(Revised ed 2025) > Chapter 3: MONEY AND CREDIT > FORMAL SECTOR CREDIT IN INDIA > p. 47
Strength: 3/5
“We have seen in the above examples that people obtain loans from various sources. The various types of loans can be conveniently grouped as formal sector loans and informal sector loans. Among the former are loans from banks and cooperatives. The informal lenders include moneylenders, traders, employers, relatives and friends, etc. In Graph 1 you can see the various sources of credit to rural households in India. Is more credit coming from the formal sector or the informal sector? The Reserve Bank of India supervises the functioning of formal sources of loans. For instance, we have seen that the banks maintain a minimum cash balance out of the deposits they receive.”
Why relevant

Explains various sources and types of loans to households (formal vs informal) and that formal loans are provided by banks/cooperatives, highlighting the existence of household borrowing separate from government borrowing.

How to extend

A student could map these household loan sources (bank mortgages) to national accounts/sectoral debt statistics to argue these household liabilities are counted under private or non‑financial debt.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 18. Non-Banking Financial Companies (NBFCs): > p. 85
Strength: 3/5
“Microfinance (micro + finance) is provision of financial services to poor and low-income households. These financial services include small loans/credit, savings, insurance, funds transfer/remittance facilities etc. Microfinance is an economic tool designed to promote financial inclusion which enables the poor and low-income households to come out of poverty, increase their income levels and improve overall living standards. A microfinance loan (Micro-credit) is defined as a collateral-free loan given to a household having annual household income up to ₹3,00,000. For this purpose, the household shall mean an individual family unit, i.e., husband, wife and their unmarried children. All collateral-free loans, irrespective of end use and mode (either through physical or digital channels), provided to low-income households, i.e., households having annual income up to ₹3,00,000, shall be considered as microfinance loans.”
Why relevant

Describes microfinance loans to households and defines household as a distinct unit for lending, reinforcing that household liabilities are a recognized class in credit statistics.

How to extend

Extend by comparing household liability classes (microloans, mortgages) with national debt categories to infer which aggregate (non‑financial/private debt) would include them.

Statement 2
Are amounts outstanding on credit cards included in non‑financial debt in the Indian economy?
Origin: Weak / unclear Fairness: Borderline / guessy
Indirect textbook clues
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > Credit Card > p. 195
Strength: 5/5
“A Credit Card is a plastic card issued by banks to enable the cardholder to pay a merchant for goods and services based on the cardholder's promise to the card issuer to pay them for the amounts so paid plus other agreed charges. Central Bank of India was the first public sector bank to introduce Credit Card in India.”
Why relevant

Defines a credit card as a plastic card issued by banks that enables payment based on the cardholder's promise to pay the card issuer.

How to extend

A student could infer that credit‑card balances are claims/loans connected to banks (financial institutions) and therefore likely count as financial‑sector or household financial liabilities rather than 'non‑financial' debt.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 8: Financial Market > 2016| > p. 250
Strength: 4/5
“• 24. The establishment of 'Payments Banks' is being allowed in India to promote financial inclusion. Which of the following statements is/are correct in this context? • 1. Mobile telephone companies and supermarket chains that are owned and controlled by residents are eligible to be promoters of Payments Banks. • 2. Payments Banks can issue both credit cards and debit cards. • 3. Payments banks cannot undertake lending activities. Select the correct answer using the code given below: • (b) 1 and 3 only • (a) 1 and 2 only • (d) 1, 2 and 3 • (c) 2 only • 25.”
Why relevant

States regulatory distinctions about Payments Banks (they cannot undertake lending and cannot issue credit cards), implying credit‑card issuance is an activity of lending banks/financial intermediaries.

How to extend

Use this to argue credit‑card balances are produced by lending activities of regulated financial intermediaries, suggesting classification as financial debt rather than non‑financial debt.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Govt. of India (Central Govt.) Total Debt/Liabilities = 1 + 2 + 3 + 4 > p. 162
Strength: 3/5
“• 1. Internal Debt[it is basically what Govt. of India borrows by issuing Debt Securities like Treasury Bills and Dated Securities in the domestic market. It is also called Domestic Market Borrowings]• 2. External Debt [It is basically borrowing from other Governments (bilateral debt) and Multilateral Agencies like World Bank, ADB etc. and FPI purchasing G-Secs]• 3. Public Account Liability [It includes National Small Savings Schemes like Public Provident Fund, Kisan Vikas Patra etc.]• 4. Off budget liabilities [Such financial liabilities of any corporate or other entity owned/controlled by the Central Government, which the Govt. has to repay or service from the Annual Financial Statement.] Internal Debt and external debt combined together is also called Public Debt (of Govt. of India) and it is contracted (on the security of) against the Consolidated Fund of India. • Components of Central Govt.”
Why relevant

Explains components of government debt (internal, external, public account, off‑budget) and distinguishes public/sovereign debt from other debt types.

How to extend

A student could use this pattern to separate government/public debt from other debts (e.g., household or corporate credit‑card liabilities) and thus question whether credit‑card amounts fit 'non‑financial debt' categories in official statistics.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > 16.18 Indian Economy > p. 486
Strength: 3/5
“• In 2019-20, ECBs remained the largest component of India's external debt, with a share of 38 per cent, followed by NRI deposits (23.2%). • In 2020-21, US dollar-denominated debt continued to be the largest component of India's external debt with a share of 53.9 per cent at the end of June 2020, followed by the Indian Rupee (31.6%), Japanese Yen (5.7%), SDR (4.5%) and Euro (3.5%). • Non-government debt is generally much higher than the government debt.”
Why relevant

Notes that non‑government debt is generally much higher than government debt and lists components of external debt (ECBs, NRI deposits, currency composition).

How to extend

Combine with the fact that credit cards are bank‑issued to hypothesize credit‑card balances are part of the larger non‑government (financial/non‑financial) debt pool, prompting a check of whether they are classified under household/financial‑sector liabilities rather than 'non‑financial debt'.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > INDIA'S EXTERNAL DEBT > p. 485
Strength: 3/5
“• India's external debt data is quarterly released by RBI.• India's external debt refers to the total debt that India as a country owes to foreign creditors. The debtors in this case can be the GOI, state governments, corporations or citizens of India. The debt includes money owed to private commercial banks, foreign governments, or even IMF and World Bank.• The various components of India's external debt include: ۵ • Multi-lateral debt a. • Bilateral debt \mathbf{b} • Year: External Debt (as a percent of GDP); 2018-19: 19.8%; 2019 - 20: 20.6%; 2020 - 21 (H1)(P): 21.6% 1 1 10 10 100”
Why relevant

Defines India's external debt as total debt owed to foreign creditors by government, states, corporations or citizens, and lists debtors including corporations and citizens.

How to extend

A student could extend this by noting that classifications distinguish debtor sectors (government, corporate, household); since credit‑card balances are household/corporate obligations to banks, one would expect them to be classified by debtor sector and as financial liabilities, not as 'non‑financial' debt of the economy.

Statement analysis

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Statement 3
Are Treasury bills included in non‑financial debt in the Indian economy?
Origin: Web / Current Affairs Fairness: CA heavy Web-answerable

Web source
Presence: 4/5
"Non-financial debt comprises treasury bills, commercial loans, industrial loans."
Why this source?
  • Directly states treasury bills are part of non-financial debt.
  • Provides treasury bills alongside other non-financial debt examples (commercial loans, industrial loans), tying the instrument to that category.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.5 Government Securities > p. 46
Strength: 4/5
“There are four kinds of government securities. • 1. Treasury bills or T-bills: These are short term debt instruments issued by the Government of India for a maturity of less than one year. Treasury bills are zero coupon securities and pay no interest. Instead, they are issued at a discount and redeemed at the face value at maturity. For example, a 91-day Treasury bill of ₹100/- (face value) may be issued at say ₹ 98.20, that is, at a discount of say, ₹1.80 and would be redeemed at the face value of ₹100/-. (Treasury bills are traded in money market).• 2.”
Why relevant

Defines Treasury bills as a type of government security (short‑term, zero‑coupon) issued by the Government of India.

How to extend

A student could combine this with definitions of government debt/non‑financial debt to see whether government securities are normally counted as debt of the public sector.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Govt. of India (Central Govt.) Total Debt/Liabilities = 1 + 2 + 3 + 4 > p. 162
Strength: 5/5
“• 1. Internal Debt[it is basically what Govt. of India borrows by issuing Debt Securities like Treasury Bills and Dated Securities in the domestic market. It is also called Domestic Market Borrowings]• 2. External Debt [It is basically borrowing from other Governments (bilateral debt) and Multilateral Agencies like World Bank, ADB etc. and FPI purchasing G-Secs]• 3. Public Account Liability [It includes National Small Savings Schemes like Public Provident Fund, Kisan Vikas Patra etc.]• 4. Off budget liabilities [Such financial liabilities of any corporate or other entity owned/controlled by the Central Government, which the Govt. has to repay or service from the Annual Financial Statement.] Internal Debt and external debt combined together is also called Public Debt (of Govt. of India) and it is contracted (on the security of) against the Consolidated Fund of India. • Components of Central Govt.”
Why relevant

States that Internal Debt consists of what the Government of India borrows by issuing debt securities like Treasury Bills and Dated Securities (i.e., domestic market borrowings).

How to extend

One could use standard classifications (government vs non‑financial sector debt) to judge whether government internal debt instruments like T‑bills appear in non‑financial debt aggregates or in public‑sector debt aggregates.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > 4.5 Government Deficits > p. 153
Strength: 5/5
“Hence, in the above example: Fiscal Deficit = Total expenditure - total receipts except borrowing Otherwise, the difference of total expenditure and total receipts will always be zero. Fiscal deficit indicates the total borrowing of the government from all sources i.e. domestic borrowing plus borrowing from external sources. Domestic borrowing includes government's debt securities like Treasury Bills and Dated Securities. Commercial banks purchase these securities on a major scale to meet their SLR requirements. Other financial institutions and RBI also purchases these securities. The fiscal deficit is a key variable in judging the financial health of the government sector and the stability of economy.”
Why relevant

Explains fiscal deficit is financed by domestic borrowing which 'includes government's debt securities like Treasury Bills and Dated Securities'.

How to extend

Using national accounts concepts, a student can check if fiscal (government) borrowing items are recorded under government/public debt rather than private non‑financial sector debt.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > PRESENT TREND IN DEFICITS > p. 112
Strength: 4/5
“Note: As per the present trend, the majority of the fiscal deficit is financed by Government through 'market borrowings' with the help of financial instruments such as G-Secs, Treasury Bills, etc. • Items: Tax Revenue (Net to Centre) (A); 2020 - 21 (Revised Estimates): ₹13.44 lakh crore; 2021 - 22 (Budget Estimates): ₹15.45 lakh crore (largest component, i.e. >50% of total budgeted receipts) • Items: Non-tax Revenue (B); 2020 - 21 (Revised Estimates): ₹2.1 lakh crore; 2021 - 22 (Budget Estimates): ₹2.24 lakh crore • Items: Non-debt Capital Receipts (Recovery of loans and disinvestments) (C); 2020 - 21 (Revised Estimates): ₹0.46 lakh crore; 2021 - 22 (Budget Estimates): ₹1”
Why relevant

Notes fiscal deficit is financed through market borrowings using instruments such as G‑Secs and Treasury Bills.

How to extend

A student could contrast 'market borrowings by government' with typical components of non‑financial corporate/household debt to see if T‑bills logically belong to non‑financial debt aggregates.

Statement analysis

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Pattern takeaway: UPSC creates 'Technical Sounding' questions that are actually simple logic puzzles. Terms like 'Non-financial debt' or 'Capital Budget' are often tested by giving you 3-4 examples and asking you to categorize them based on first principles.
How you should have studied
  1. [THE VERDICT]: Conceptual Sitter. Solvable by logic, not rote learning. Source: Economic Survey / RBI Financial Stability Reports.
  2. [THE CONCEPTUAL TRIGGER]: Macroeconomic Aggregates & System of National Accounts (SNA). Specifically, the distinction between the 'Financial Sector' (Intermediaries) and the 'Real Sector' (Households, Firms, Govt).
  3. [THE HORIZONTAL EXPANSION]: Memorize the Borrower Classification: 1. Financial Debt: Call Money, Certificate of Deposits (issued by banks), Bonds issued by NBFCs. 2. Non-Financial Debt: G-Secs/T-Bills (Govt), Corporate Bonds (Firms), Mortgages/Credit Cards (Households), Commercial Paper (Corporates).
  4. [THE STRATEGIC METACOGNITION]: Stop memorizing instrument lists. Instead, apply the 'Who is the Borrower?' test. If the entity borrows to consume or invest in real assets (Govt, Household, Factory), it is Non-Financial Debt. If they borrow to lend (Bank), it is Financial Debt.
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Concept hooks from this question
📌 Adjacent topic to master
S1
👉 Internal vs External Debt (public vs external creditors)
💡 The insight

Distinguishing internal (domestic market borrowings) from external debt is central to any classification of the economy's debt stock.

High-yield for UPSC because questions often ask about composition of public debt, balance between domestic and external borrowings, and implications for fiscal risk. Links to fiscal policy, balance of payments, and sovereign debt sustainability questions; enables answering items on debt composition and sources of financing.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Govt. of India (Central Govt.) Total Debt/Liabilities = 1 + 2 + 3 + 4 > p. 162
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Govt. of India (Central Govt.) Total Debt/Liabilities = 1 + 2 + 3 + 4 > p. 163
🔗 Anchor: "Are housing loans owed by households included in non‑financial debt in the India..."
📌 Adjacent topic to master
S1
👉 Formal vs Informal Household Credit
💡 The insight

Knowing whether household loans come from formal institutions (banks, cooperatives) or informal lenders affects how household liabilities are recorded and monitored.

Important for questions on credit penetration, financial inclusion, and measurement of household indebtedness; connects to banking regulation, rural credit policy and RBI supervision topics. Helps evaluate policy measures and interpret statistics on household debt.

📚 Reading List :
  • Understanding Economic Development. Class X . NCERT(Revised ed 2025) > Chapter 3: MONEY AND CREDIT > FORMAL SECTOR CREDIT IN INDIA > p. 47
🔗 Anchor: "Are housing loans owed by households included in non‑financial debt in the India..."
📌 Adjacent topic to master
S1
👉 Microfinance and Household Loan Definitions
💡 The insight

Clear definitions of microfinance and household loans identify which small household borrowings are captured in formal credit aggregates.

Useful for questions on poverty alleviation, financial inclusion and classification of small loans in national statistics; connects to NBFC regulation, targeted credit schemes, and measurement of low‑income household indebtedness.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 18. Non-Banking Financial Companies (NBFCs): > p. 85
🔗 Anchor: "Are housing loans owed by households included in non‑financial debt in the India..."
📌 Adjacent topic to master
S2
👉 Credit cards as short‑term consumer credit
💡 The insight

Credit cards are bank‑issued instruments that create a cardholder promise to pay, so outstanding balances are a form of consumer/household credit that must be classified when compiling debt statistics.

High-yield: clarifies the nature of household liabilities relevant for national accounts and monetary statistics; links money-and-banking topics to household finance and debt composition questions; enables candidates to reason about whether a liability is financial, short‑term, or household in classification problems.

📚 Reading List :
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > Credit Card > p. 195
🔗 Anchor: "Are amounts outstanding on credit cards included in non‑financial debt in the In..."
📌 Adjacent topic to master
S2
👉 Domestic (internal) vs external and public debt categories
💡 The insight

India’s debt is categorized into internal (domestic) debt, external debt, public account liabilities and off‑budget liabilities, so placing any debt item requires knowing these primary buckets.

High-yield: mastering these categories helps answer public finance and macroeconomics questions on which instruments or liabilities fall under government/public debt vs external debt or private debt; useful for questions on debt statistics, government borrowing and balance‑of‑payments implications.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Govt. of India (Central Govt.) Total Debt/Liabilities = 1 + 2 + 3 + 4 > p. 162
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Govt. of India (Central Govt.) Total Debt/Liabilities = 1 + 2 + 3 + 4 > p. 163
🔗 Anchor: "Are amounts outstanding on credit cards included in non‑financial debt in the In..."
📌 Adjacent topic to master
S2
👉 Trade credit as a form of cross‑border borrowing
💡 The insight

Trade credit involves importers deferring payment to overseas suppliers or banks and is treated alongside other external borrowing, illustrating how non‑bank credit can enter external debt tallies.

High-yield: helps distinguish types of external liabilities in the balance of payments and external debt data; prepares candidates to spot when trade‑related payables count as external debt rather than purely domestic liabilities.

📚 Reading List :
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > 3. Trade Credit > p. 480
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > IRVE > p. 487
🔗 Anchor: "Are amounts outstanding on credit cards included in non‑financial debt in the In..."
📌 Adjacent topic to master
S3
👉 Treasury bills are short‑term government securities
💡 The insight

Treasury bills are zero‑coupon, short‑term debt instruments issued by the Government of India and traded in the money market.

High‑yield for questions on money markets and government borrowing: explains instrument characteristics, maturity profile, and role in liquidity management. Connects to topics on monetary policy operations, short‑term interest rates, and market instruments frequently asked in prelims and mains.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.5 Government Securities > p. 46
🔗 Anchor: "Are Treasury bills included in non‑financial debt in the Indian economy?"
Micro-concepts

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🌑 The Hidden Trap

The 'Credit-to-GDP Gap'. Since UPSC asked about the components of debt, the next logical step is the metric used to measure systemic risk. Also, look out for 'Household Financial Savings' components (Currency, Deposits, Shares) vs 'Physical Savings' (Real Estate).

⚡ Elimination Cheat Code

The 'Odd One Out' Logic: Ask yourself, 'Is the borrower a Bank?'
1. Households (Housing) -> Not a Bank.
2. Households (Credit Card) -> Not a Bank.
3. Govt (T-Bills) -> Not a Bank.
Since none are banks, all belong to the same category (Non-Financial). Select All.

🔗 Mains Connection

Mains GS3 (Economic Stability): High 'Non-Financial Corporate Debt' was the root of the Twin Balance Sheet problem (2014-2017). High 'Household Debt' (Credit cards/Housing) drives consumption but risks a 2008-style crisis if incomes stagnate.

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SIMILAR QUESTIONS

IAS · 2022 · Q100 Relevance score: 0.38

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?

IAS · 2014 · Q33 Relevance score: -0.10

In the context of Indian economy, which of the following is/are the purpose/purposes of 'Statutory Reserve Requirements'? 1. To enable the Central Bank to control the amount of advances the banks can create 2. To make the people's deposits with banks safe and liquid 3. To prevent the commercial banks from making excessive profits 4. To force the banks to have sufficient vault cash to meet their day-to-day requirements Select the correct answer using the code given below.

IAS · 2019 · Q63 Relevance score: -1.09

Consider the following statements : 1. Most of India's external debt is owed by governmental entities. 2. All of India's external debt is denominated in US dollars. Which of the statements given above is/are correct?

CDS-I · 2024 · Q29 Relevance score: -1.59

Which of the following are included in M1 definition of money for the Indian economy?

IAS · 2016 · Q12 Relevance score: -1.91

Which of the following is/are included in the capital budget of the Government of India? 1. Expenditure on acquisition of assets like roads, buildings, machinery, etc. 2. Loans received from foreign governments 3. Loans and advances granted to the States and Union Territories Select the correct answer using the code given below.