In the context of the Indian economy, non-financial debt includes which of the following ? 1. Housing loans owed by households 2. Amounts outstanding on credit cards 3. Treasury bills Select the correct answer using the code given below :
- (a) 1 only
- (b) 1 and 2 only
- (c) 3 only
- (d) 1, 2 and 3 ✓ UPSC's answer
Why the answer is (d)
• 'Non-financial debt' is the debt owed by the non-financial sectors of an economy — households, non-financial companies and the government — as opposed to debt of banks and other financial institutions (this is how the BIS and IMF measure it).
• Housing loans owed by households (1) and amounts outstanding on credit cards (2) are household debt.
• Treasury bills (3) are short-term borrowing by the government, which is also a non-financial sector.
• UPSC's official answer key gives (d).
• Hence 1, 2 and 3, option (d).
Why the other options are wrong
- (a) 1 only
- Credit-card dues and Treasury bills are also non-financial debt.
- (b) 1 and 2 only
- Treasury bills (government debt) are also non-financial debt.
- (c) 3 only
- Household housing loans and credit-card dues are also non-financial debt.
Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2020, held on 4 October 2020. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.