Q. 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?
(a) I and II only
(b) II and III only
(c) I and III only
(d) I, II and III
Correct Answer: (a) I and II only
UPSC Prelims 2025 GS Paper's Solution
Explanation :
Statement I: “Capital receipts create a liability or cause a reduction in the assets of the Government.”
This statement is correct. Capital receipts are those receipts of the government which either create liabilities (e.g., borrowings) or reduce assets (e.g., disinvestment).
Statement II: “Borrowings and disinvestment are capital receipts.”
This statement is correct. Borrowings create liabilities, and disinvestment reduces government assets. Both are classified as capital receipts.
Statement III: “Interest received on loans creates a liability of the Government.”
This statement is incorrect. Interest received on loans is a revenue receipt, not a capital receipt. Revenue receipts neither create liabilities nor reduce assets. Instead, they are regular income for the government.
Thus, statements I and II are correct, while statement III is incorrect. Hence, the correct answer is option (a).
