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How would you distinguish between the revenue and capital receipts of the government?
1. Revenue receipts are non-redeemable unlike certain capital receipts.
2. Capital receipts are always debt creating unlike revenue receipts.
Which of the above is/are correct?
Correct Option is 1 only
Statement 1: The main difference between revenue receipts and capital receipts is that in the case of revenue receipts, government is under no future obligation to return the amount, i.e., they are non- redeemable. But in case of capital receipts which are borrowings, government is under obligation to return the amount along with Interest. Statement 2: Capital receipts may be debt creating or non-debt creating. So, 2 is wrong. Examples of debt creating receipts are—Net borrowing by government at home, loans received from foreign governments, borrowing from RBI. Examples of non-debt capital receipts are—Recovery of loans, proceeds from sale of public enterprises (i.e., disinvestment), etc. These do not give rise to debt.
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