Economics · Fiscal Policy and Debt Market
Consider the following statements regarding the relationship between fiscal policy and the debt market in India: Statement 1: The Government of India Market Borrowing Program dictates the supply of sovereign securities. Large fiscal deficits often necessitate higher borrowing, putting upward pressure on G-Sec yields. Statement 2: Primary Dealers (PDs) act as market makers, providing liquidity through participation in primary auctions and secondary market trading, thereby facilitating the government's borrowing program. Statement 3: The crowding out effect occurs when excessive government borrowing leads to higher market interest rates, which can reduce the availability of credit and increase the cost of capital for the private sector. Which of the statements provided above are correct?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1All Statement 1, Statement 2, and Statement 3 are correct✓
- 2Statement 2 and Statement 3 are correct
- 3Statement 1 and Statement 2 are correct
- 4Only Statement 1 is correct
Correct answer
All Statement 1, Statement 2, and Statement 3 are correct
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