Inflation index bonds UPSC is an essential current topic in India. The UPSC aspirants must work on grabbing an excellent hold on the recent topics in the nation. Get the knowledge about the difference between IIBs and other Bank Deposits. You can fetch the overall summary of the topic for your UPSC exam preparation.
Salient Features of Inflation Index Bonds
The inflation index bonds UPSC is important for the UPSC candidates to understand and grab because multiple questions are asked about the current happenings in the UPSC exam. Inflation Index Bonds (IIBs) are an increased version of Capital Indexed Bonds (CIBs) that were issued throughout 1997.
Whereas CIBs protected inflation just for the principal quantity, IIBs offer protection for the interest furthermore. The salient features of IIBs are as follows. IIBs have a set real coupon rate, but a nominal principal price that’s adjusted against inflation. Periodic coupon payments are created on the adjusted principal. In this manner, these bonds can offer inflation protection to each principal and coupon payment.
Once the bond matures, the (upper) adjusted principal or face price is paid. The final Wholesale indicator (WPI) is getting used for providing inflation protection. Just in case of revision within the base year for the WPI series, the base conjunction technique would be used to construct an identical series for regulating.
Inflation Index Bonds UPSC
All the facts and features about this topic are covered perfectly in this article. Here is more relevant information and knowledge. These bonds are being issued by auction methodology. At the initial auction, they’re listed within the secondary market The non-competitive portion is inflated from five p.c to up to twenty p.c to encourage retail participation. To begin with, these bonds are being issued for a tenor of ten years.
The basic purpose for releasing IIBs is to safeguard the savings of the poor and class from inflation. One more reason was to supply incentives to the unit sector to save lots of monetary instruments instead of gold. The increasing accounting Deficit (CAD) driven by higher gold imports was changing into a reason behind serious concern.
Since the investment in IIBs will pay attention to the prevailing inflation, the retail investors are benefited. This can be because they assist the little capitalist to safeguard even the principal quantity against inflation, excluding receiving the yield of the investment, which supports the prevailing inflation.
Since the gold costs are volatile and therefore the tiny capitalist cannot accumulate enough capital to invest in real estate, it’s expected that IIBs would be useful for the capitalist. It’s additionally expected to spice up the domestic savings and reverse the decline in the savings-to-GDP ratio.
However, the aim of issuing these bonds is consummated on the condition that they’re on the market for the most part to retail investors, instead of huge pension funds or insurance firms. Linking them with the CPI instead of WPI, in the future, would be another step in the right direction.
The UPSC notes of different topics are the most significant part of this prestigious exam. This is because the updated topics are asked in almost all the sections of the paper and the candidates are required to answer these questions in the interview as well.
Aspiring to work as an administrator of the country and a representative of the functions happening in the nation, aspirants require a good hold on the current happenings of the country. If you want to grab more relevant content, you can visit the UPSC Pathshala website. For more questions and inquiries, visit the website.