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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: —  Âˇ  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.

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