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    Question

    In context of public finance in India, consider the

    following: 1. Securities issued against Small savings funds 2. Market Stabilization Scheme Bonds 3. Securities issued to International Monetary Fund (IMF) Which of these is/are component(s) of internal debt?
    A 1 only Correct Answer Incorrect Answer
    B 1 and 2 only Correct Answer Incorrect Answer
    C 2 only Correct Answer Incorrect Answer
    D 1, 2 and 3 Correct Answer Incorrect Answer

    Solution

    Public Debt in India includes only Internal and External Debt incurred by the Central Government. Internal Debt includes liabilities incurred by resident units in the Indian economy to other resident units. Internal debt comprises of: Loans raised in open market Special securities issued to RBI e.g. Market Stabilization Scheme (MSS) bonds: MSS was created to assist the RBI in managing its sterilization operations. The Government borrows under this scheme from the RBI, while proceeds from such borrowings are maintained in a separate cash account with the latter and is used only for redemption of T-bills /dated securities raised under this scheme. MSS Bonds are Governed by a MoU between the Government of India and the RBI. Hence, Statement 1 is Correct Borrowings through treasury bills including treasury bills issued to State Government, commercial bank etc All deposits under small savings schemes are credited to the National Small Savings Fund (NSSF). The balance in the NSSF (net of withdrawals) is invested in special Government securities and is counted as the Internal Debt. Hence, Statement 2 is Correct Non-negotiable, non-interest bearing rupee securities issued to international financial institutions viz. the IMF, IBRD ADB etc. Hence, Statement 3 is Correct

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