Consider the following statements: I. Capital receipts create a liability

Q. Consider the following statements:

UPSC Civil Services Examination (Prelims) 2025 – General Studies Paper I

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

Answer: (a) I and II only

Statement I is correct: Capital receipts either create a liability (like borrowings) or lead to reduction in assets (like disinvestment).
Statement II is correct: Both borrowings and disinvestment are part of capital receipts.
Statement III is incorrect: Interest received on loans is revenue receipt, and it does not create any liability. In fact, it is an earning.