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?

The correct option is Both 1 and 2.

Statement 1 is correct:
Household financial savings refer to the surplus funds that households invest in various financial assets rather than consuming them. These financial assets include bank deposits, life insurance funds, provident/pension funds, currency, and small savings schemes (such as the Public Provident Fund, National Savings Certificates, etc.).
A significant portion of these household savings is directed toward government borrowings. For instance, the money deposited in small savings schemes goes directly into the National Small Savings Fund (NSSF), which the government uses to finance its fiscal deficit. Additionally, commercial banks, insurance companies, and provident funds are legally required to invest a portion of their deposits/funds in government securities (like G-Secs and Treasury Bills) through mandates like the Statutory Liquidity Ratio (SLR). Thus, household financial savings are effectively routed to fund government borrowing requirements.

Statement 2 is correct:
The internal debt of the Government of India consists of various liabilities, including market loans, treasury bills, and securities issued to international financial institutions. Among these, dated securities (which are long-term government bonds that carry a fixed or floating coupon rate and are issued at market-determined yields through auctions conducted by the Reserve Bank of India) constitute the largest component of the government's internal debt. By issuing these securities at market-related rates in public auctions, the government secures a stable and substantial source of domestic funding to manage its public debt portfolio.