Q. 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?
Exp) Option c is the correct answer.
Statement 1 is correct: Gross financial savings of households include monies saved in banks, provident funds, pension schemes, shares, insurance and in the form of currency, among other categories. These savings form the pool of domestic finance for investments which are crucial to job creation, and are currently critical as they will be crucial in deciding the pace of economic revival.
Deposits with banks are the single largest form of households’ financial assets, followed by insurance funds, mutual funds and currency. Therefore, any adverse movement in the household savings will have a significant bearing on banks, insurance companies and mutual/provident funds, who, in turn, are key investors in government securities.
Statement 2 is correct: Internal debt constitutes over 93 per cent of the overall public debt. Internal loans that make up for the bulk of public debt are further divided into two broad categories – marketable and non-marketable debt.
The sources of public debt are dated government securities (G-Secs), treasury bills, external assistance, and short-term borrowings.