🧷 Authentic Classroom Explanation by IAS Monk

📌 The Question:

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?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

✅ Correct Answer: (c) Both 1 and 2

🧠 Classroom Explanation

• Statement 1 is correct
  • Household financial savings include:
    • Bank deposits
    • Insurance and pension funds
    • Mutual funds
    • Small savings schemes
    • Debt securities
  • The Government borrows from the market by issuing G-Secs and Treasury Bills.
  • Banks, insurance companies, provident and pension funds invest household savings into these instruments.
  • Hence, a part of household financial savings ultimately finances government borrowing.
• Statement 2 is correct
  • Public Debt of the Central Government is classified into:
    • Internal Debt
    • External Debt
  • Internal debt mainly consists of:
    • Marketable debt → Dated Government Securities & Treasury Bills
    • Non-marketable debt → small savings, special securities
  • Dated securities issued via auctions at market-related interest rates constitute the largest share of internal debt.
  • As of recent years, dated securities account for nearly two-thirds of total public debt.

👉 Therefore, both statements are correct.

🔍 Curiosity Raiser

When households save more,
does the Government breathe easier—or borrow bigger?

🧘 IAS Monk Whisper

Savings sleep in homes,
but awaken as sovereign debt.