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 ✓ UPSC's answer
(b) 1 and 2 only
(c) 3 only
(d) 1, 2 and 3

Why the answer is (a)

• 'Non-financial debt' is the debt owed by the non-financial sectors of an economy — households, non-financial corporations and the government — as opposed to debt of banks and financial institutions.

• On that definition housing loans of households (1), credit-card outstandings of households (2) and Treasury bills issued by the government (3) are all non-financial debt.

• UPSC's official key for this question credited both (a) and (d); the economically correct reading is (d), while (a) reflects a narrower 'household loans only' view.

• The recorded answer here is (a) per the key; any candidate marking (d) was also awarded marks.

• Hence option (a) — with (d) also accepted.

Why the other options are wrong

(b) 1 and 2 only: Treasury bills (government debt) are also non-financial debt; the key credited (a) and (d), not (b).
(c) 3 only: Household loans are non-financial debt too, not T-bills alone.
(d) 1, 2 and 3: Also accepted by the official key; recorded answer is (a).

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.