Economy2025
Consider the following statements: I. Capital receipts create a liability or cause a reduction in the assets of the Government. II. Borrowings and disinvestment are capital receipts. III. Interest received on loans creates a liability of the Government. Which of the statements given above are correct?
Explanation
The correct option is I and II only because capital receipts are transactions that either create a liability for the government, such as borrowings, or reduce its assets, such as disinvestment proceeds. Statement III is incorrect since interest receipts are revenues for the government, not liabilities; they reflect earnings from previous loans rather than obligations. Understanding these distinctions is essential for analyzing government finances and fiscal policy, which is a key topic in UPSC examinations.