With reference to the Indian Public Finance consider the following statements: 1. External liabilities reported in Union Budget are based on historical exchange rates 2. The continued high borrowing has kept the real interest rates high in the economy 3. The upward trend in the ratio of Fiscal Deficit to GDP in recent years has an adverse effect to private investments. 4. Interest payments is the single largest component of the non-plan revenue expenditure of the Union Government. Which of these statements are correct ?

Option 3 (2, 3 and 4) is the best choice. Statement 1 is incorrect because external debt/liabilities are expressed in US dollars and their reported dollar value changes with exchange-rate movements (so they are not fixed to historical exchange rates) [1]. Statement 2 is correct in the macro sense: continued high government borrowing exerts upward pressure on interest rates (crowding-out), keeping real rates elevated relative to what they would be without such borrowing; this links to debt dynamics and interest–growth interactions discussed in debt literature [2]. Statement 3 is correct: a rising fiscal-deficit-to-GDP ratio can crowd out private investment and deter private-sector capital formation [2]. Statement 4 is also correct: given the large public debt stock, interest payments remain a major component of revenue (non‑plan) expenditure for the Union Government [3].

Sources

1. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Govt. of India (Central Govt.) Total Debt/Liabilities = 1 + 2 + 3 + 4 > p. 164
2. [2] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Findings from previous years Economic Surveys > p. 159
3. [3] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Govt. of India (Central Govt.) Total Debt/Liabilities = 1 + 2 + 3 + 4 > p. 162