Consider the following statements: 1) Capital receipts create a liability or cause a reduction in the assets of the Government. 2) Borrowings and disinvestment are capital receipts. [2025]

Consider the following statements:

Capital receipts create a liability or cause a reduction in the assets of the Government.
Borrowings and disinvestment are capital receipts.
Interest received on loans creates a liability of the Government.

All those receipts of the government which create liability or reduce financial assets are termed as capital receipts. When the government takes fresh loans (borrowings), it means that in the future these loans will have to be repaid and interest paid on them. Similarly, when the government sells an asset (disinvestment), it means that, in the future, its earnings from that asset will disappear. Thus, these receipts can be debt-creating or non-debt-creating.

Interest received on loans is a revenue receipt, not a capital receipt, and it does not create a liability; rather, it is income for the government.

Statement III can be eliminated using basic understanding—interest received is income for the government, not a liability, so the statement is incorrect. Once Statement III is eliminated, options containing it are removed, leaving option (a).