Question 39 from UPSC CSE 2020 - ECONOMICS

Question

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:

IASCODEX · Accepted Answer

Correct Option: D. 1, 2, and 3

Strategy: - Define 'non-financial debt' as liabilities owed by entities outside the financial sector.
- Confirm 'housing loans' and 'credit card balances' as non-financial due to their origin from households.
- Include 'Treasury bills' as non-financial debt, recognizing government as a non-financial sector entity.
- Conclude that all listed debt types fit this broad definition.

Key Info: Non-financial debt refers to the total liabilities owed by units that are not part of the financial sector--primarily households, private businesses, and government. Financial sector entities include commercial and cooperative banks, NBFCs, insurance companies, mutual funds, pension funds, and similar institutions. Debt owed by non-financial entities takes multiple forms:

- Housing loans: These are borrowings of households used for construction or purchase of residential properties. They create direct indebtedness of households, a non-financial sector participant.
- Credit card balances: These are unsecured short-term loans provided to households or non-financial businesses, revolving until fully repaid. The outstanding amount owed forms part of non-financial debt if the holder is not a financial institution.
- Treasury bills: Issued by governments to meet short-term funding requirements, these are liabilities of the government, a quintessential non-financial sector entity.

Reporting of non-financial debt is crucial for macroeconomic stability assessment, as rapid rises in such debt may impact overall economic health. The International Monetary Fund (IMF) and Bank for International Settlements (BIS) routinely track non-financial sector debt across advanced, emerging, and developing economies.

IASCODEX · Answer

Option A: 1 only

IASCODEX · Answer

Option B: 1 and 2 only

IASCODEX · Answer

Option C: 3 only

In the context of the Indian economy, non-financial debt includes which of the following? Housing loans owed by households Amounts outstanding on credit cards Treasury bills Select the correct answer using the code given below:

In the context of the Indian economy, non-financial debt includes which of the following?

Housing loans owed by households

Amounts outstanding on credit cards

Treasury bills
Select the correct answer using the code given below: