UPSC Prelims 2025 · GS Paper I
Question 10: Economy and Social Development
Consider the following statements :
- ICapital receipts create a liability or cause a reduction in the assets of the Government.
- IIBorrowings and disinvestment are capital receipts.
- IIIInterest received on loans creates a liability of the Government.
Which of the statements given above are correct?
AnswerThe answer is (a).
Capital receipts are receipts that either create a liability (borrowings, including external aid) or reduce an asset of the government (disinvestment, recovery of loans). So statements I and II are correct. Interest received on loans given by the government is income earned on an asset: it creates no liability and reduces no asset, so it is a revenue receipt, not a capital receipt. Statement III is wrong. Remember: loan recovery is capital, interest on that loan is revenue.
- I. Capital receipts either create a liability or reduce a government asset.
- II. Borrowings and disinvestment are both capital receipts.
- III. Interest received is a revenue receipt and creates no liability.
How you could have got this
- If you were sure statement III is not correct, (b), (c) and (d) go: each of them includes III.
What you needed to know: Interest received is a revenue receipt and creates no liability.
Only (a) is left. You didn’t need statements 1 or 2.
This follows an unofficial answer: UPSC has not published its key for this year, and if that answer is wrong, so is this path.
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) Right: I and II are correct; interest received is a revenue receipt.
- (b) Wrong: III treats interest received as a liability, which it is not.
- (c) Wrong: III is false.
- (d) Wrong: III is false, so not all three hold.
Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2025, General Studies Paper I, Series A. The paper on upsc.gov.in.