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UPSC Prelims 2025 GS Paper 1, question 10

Topic: Economy

Q10

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?

  1. (a) I and II onlyCorrect answer
  2. (b) II and III only
  3. (c) I and III only
  4. (d) I, II and III

Solution.

Answer: (a) I and II only

  1. Statement I is correct: capital receipts of the Government are those receipts that either create a financial liability (such as borrowings) or reduce financial/physical assets (such as disinvestment or recovery of loans).
  2. Statement II is correct: market borrowings (debt-creating) and disinvestment proceeds (asset-reducing) are both classified as capital receipts in the Union Budget.
  3. Statement III is incorrect: interest received on loans advanced by the Government is a non-tax revenue receipt and does not create any liability.