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 ?

The correct answer is Both 1 and 2.

Key PointsHousehold financial savings

• It refers to currency, bank deposits, debt securities, mutual funds, pension funds, insurance, and investments in small savings schemes.
• The total of these savings is referred to as gross household financial savings.
• Once financial liabilities, including loans from banks, non-banking financial companies (NBFCs), and housing finance companies, are subtracted from gross savings, what remains is referred to as net household financial savings. 
• A share of household financial savings goes to government borrowings, as part of public accounts of India. It mainly consists of provident fund.
• According to the Reserve Bank of India (RBI), household financial savings in India stood at 11.6% of GDP in 2022-23, with a significant portion invested in government securities and small savings schemes Hence, Statement 1 is correct.

Dated Government Securities

• It is government securities or bonds which are long-term, the tenor ranging from 5 years to 30 years.
• These have a fixed or floating coupon (or interest rate) associated with them which are paid on the face value at fixed intervals.
• The securities can be issued by both the centre and the state governments to mobilise funds.
• The government issues these funds to finance a fiscal deficit.
• Dated securities mean regular government bonds, whereas T-bills are considered separately.
• Dated securities issued at market-related rates comprise a large share of internal debt.  As of March 2023, dated securities accounted for around 77% of India's total outstanding internal debt, valued at ₹80.2 lakh crore. Hence, Statement 2 is correct.