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 ?

Both statements are correct because household financial savings—channeled through bank deposits, life insurance, and provident funds—are a primary source for government borrowing, while dated securities issued at market-determined rates constitute the largest component of India's internal debt. Option (b) is a tempting wrong choice if one incorrectly assumes that household savings only fund private investment, overlooking that financial intermediaries must invest a significant portion of these deposits in government securities to meet statutory requirements like the SLR. The core concept being tested is the composition of India’s public debt and the institutional mechanisms that link domestic savings to government deficit financing.