With reference to the Indian economy, consider the following statements: 1. A share of the household financial savings goes towards government borrowings. 2. Dated securities issued at market-related rates in auctions form a large component of internal debt. Which of the above statements is/are correct?

Answer: C. Both statements about the Indian economy and government borrowings are correct. Statement 1 is CORRECT. A significant portion of HOUSEHOLD FINANCIAL SAVINGS in India does flow into GOVERNMENT BORROWINGS. Households invest in small savings (PPF, NSC, KVP, Sukanya Samriddhi), Government Securities directly, and indirectly through banks and insurance/pension funds which hold large G-Sec portfolios. Per RBI's Flow of Funds accounts, government securities and small savings absorb a large fraction of household financial savings. Statement 2 is CORRECT. Dated securities (G-Secs with maturities of 1-40 years) issued at MARKET-RELATED RATES through RBI AUCTIONS form a LARGE COMPONENT OF INDIA'S INTERNAL DEBT. RBI conducts weekly G-Sec auctions; primary dealers and institutional investors bid; the market-clearing yield determines pricing. Internal debt of about Rs 130+ lakh crore is dominated by dated securities (about 80%+). Source: RBI Annual Report / Status Paper on Government Debt / Ministry of Finance budget documents.