UPSC Prelims PYQ – Borrowings & disinvestment- capital receipts

Question: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?

Explanation:
Statement I: ✅ Correct. Capital receipts are those receipts of the government which create liability or reduce financial assets.
Statement II: ✅ Correct. Borrowings (from RBI, foreign governments, securities) and disinvestment (selling government’s stake in PSUs) are capital receipts.
Statement III:Incorrect. Interest received on loans is a revenue receipt since it is income and does not create liability.
👉 Therefore, the correct answer is a) I and II only.