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: Capital receipts are indeed those government receipts that either create a liability (e.g., borrowings) or lead to a reduction in the government's assets (e.g., disinvestment, recovery of loans). So, Statement I is correct. Statement II: Borrowings create a future repayment liability for the government, and disinvestment involves selling government assets (like shares in PSUs), both of which are classic examples of capital receipts. So, Statement II is correct. Statement III: Interest received on loans given by the government is a recurring income for the government and is classified as a revenue receipt, not a capital receipt. It does not create a liability for the government; instead, it is a source of income. So, Statement III is incorrect. Therefore, statements I and II are correct.