With reference to the Indian Public Finance consider the following statements: 1. External liabilities reported in Union Budget are based on historical exchange rates 2. The continued high borrowing has kept the real interest rates high in the economy 3. The upward trend in the ratio of Fiscal Deficit to GDP in recent years has an adverse effect to private investments. 4. Interest payments is the single largest component of the non-plan revenue expenditure of the Union Government. Which of these statements are correct?

1. Statement 1 is incorrect. External liabilities reported in the Union Budget documents are typically converted using exchange rates prevailing at the time of reporting or specific dates set for reporting, not purely historical exchange rates from when the liability was incurred. 2. Statement 2 is correct. Continued high borrowing by the government increases the demand for loanable funds, which can put upward pressure on interest rates. High government borrowing can crowd out private borrowing and keep overall real interest rates (nominal rates adjusted for inflation) higher than they might otherwise be. 3. Statement 3 is correct. A high and rising ratio of Fiscal Deficit to GDP indicates increased government borrowing. This can lead to higher interest rates and reduced availability of funds for the private sector, having an adverse effect on private investments (crowding-out effect). 4. Statement 4 is correct. Interest payments on accumulated government debt typically constitute the single largest component of non-plan revenue expenditure for the Union Government. 5. Therefore, statements 2, 3, and 4 are correct.