UPSC Prelims 2022 · GS Paper I
Question 10: Economy and Social Development
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 ?
AnswerUPSC’s answer is (c).
Household financial savings flow into bank deposits, insurance, provident and pension funds and small savings, and these institutions invest heavily in government securities, so part of household savings finances the government's borrowing. In India's internal debt, dated securities sold through auctions at market-related yields form the bulk, while treasury bills are a smaller part. Both statements hold.
- 1. Household savings reach government through banks, insurers and funds that hold government securities.
- 2. Auctioned dated securities at market-linked rates are the main component of internal debt.
How you could have got this
- If you were sure statement 1 is correct, (b) and (d) go: each of them leaves 1 out.
What you needed to know: Household savings reach government through banks, insurers and funds that hold government securities.
- Then, if you were sure statement 2 is correct, (a) goes: it leaves 2 out.
What you needed to know: Auctioned dated securities at market-linked rates are the main component of internal debt.
Only (c) is left. This one needs every statement.
Which options go is worked out from UPSC’s key and the options, not by a model.
Why each option is right or wrong
- (a) Wrong. Statement 2 is also correct.
- (b) Wrong. Statement 1 is also correct.
- (c) Correct. Both describe how government borrowing is funded.
- (d) Wrong. Both statements are correct.
Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2022, General Studies Paper I, Series A. The paper on upsc.gov.in.