Consider the following statements : I. Capital receipts create a liability or cause a reduction in the assets of the Government. II. Borrowings and disinvestment are capital receipts. III. Interest received on loans creates a liability of the Government. Which of the statements given above are correct?

Statement I is correct: by definition, capital receipts either create a liability (e.g., borrowings) or reduce assets (e.g., disinvestment, recovery of loans). Statement II is correct: borrowings create a liability and disinvestment reduces government assets, so both are capital receipts. Statement III is incorrect: interest received on loans given by the government is a revenue receipt (current income), not a liability — it neither creates a liability nor reduces assets. Hence only I and II are correct.