UPSC 2002: 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?

Statement 1 is incorrect because external liabilities in the Union Budget are shown at current (not historical) exchange rates. Statements 2, 3 and 4 are correct: persistent heavy government borrowing can keep real interest rates high; a rising Fiscal-Deficit-to-GDP ratio crowds out private investment; and interest payments have long been the largest single item of non-plan revenue expenditure. Hence the valid combination is 2, 3 and 4 (option c). ([uttarpradesh.pscnotes.com](https://uttarpradesh.pscnotes.com/uppcs-prelims/with-reference-to-the-indian-public-finance-consider-the-following-sta/))