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?
Answer & explanation
Answer: (c) Both 1 and 2
The government borrows at home from the public — directly through small savings schemes and indirectly through banks, insurers and provident funds that hold household money — so part of household savings finances it. Most of the Centre's internal debt is in dated securities sold at auctions.
- ✓ 1. Household deposits in small savings schemes are lent to the Centre through the National Small Savings Fund, and bank deposits flow into government bonds that banks must hold under the SLR.
- ✓ 2. At end-March 2022, dated securities alone made up 66.5 per cent of the Centre's public debt, most of which is internal debt; they are sold through auctions at market-determined yields.
Remember · Centre's internal debt: dominated by auctioned dated securities (about two-thirds of public debt, 2022); household savings reach the government via small savings (NSSF) and banks' SLR holdings.
📘 Read it in NCERT: Class 12 Introductory Macroeconomics, Ch 5 (practise this chapter)
Sources
- NCERT Class 12 · Introductory Macroeconomics, Chapter 5 “Net borrowing at home includes that directly borrowed from the public through debt instruments (for example, the various small savings schemes) and indirectly from commercial banks through Statutory Liquidity Ratio (SLR).”
- Ministry of Finance (DEA) — Status Paper on Government Debt 2021-22 ↗ “The outstanding amount under dated securities and Treasury Bills accounted for 66.5 per cent and 6.2 per cent of the Public Debt, respectively (Table 1.4). … The non-marketable securities in internal debt are the special Central Government securities issued to National Small Savings Fund (NSSF), securities issued to international financial institutions”
Question and answer: UPSC's official GS Paper I (2022, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·