Daily Prelims Notes 28 August 2021

August 28, 2021
Posted by: OptimizeIAS Team
Category: DPN

Daily Prelims Notes

28 August 2021

Table Of Contents

Subject – History

Context – Prime Minister Narendra Modi will inaugurate the newly renovated Jallianwala Bagh complex and museum in Amritsar through video conference.

Concept –

The complex is a memorial dedicated to those who were killed on April 13, 1919 on orders of Brigadier General Reginald Dyer.
The tragedy, also known as the Massacre of Amritsar exposed the inhuman approach of the British when the British troops under General Reginald Edward Dyer opened fire into an unarmed crowd.
Earlier Events –
- The massacre of April 1919 wasn’t an isolated incident, rather an incident that happened with a multitude of factors working in the background.
- During World War I (1914–18) the British government of India enacted a series of repressive emergency powers that were intended to combat subversive activities.
- The Anarchical and Revolutionary Crimes Act of 1919 popularly known as Rowlatt Act (Black Act) which was passed on 10^th March, 1919, authorized the government to imprison or confine, without a trial, any person associated with seditious activities which led to nationwide unrest.
- On 13^th April 1919, a crowd of at least 10,000 men, women and children gathered in Jallianwala Bagh to request the release of Dr. Saifuddin Kitchlew and Dr. Satyapal.
  - The two prominent leaders who were a symbol of Hindu-muslim unity, organised a peaceful protest against the Rowlatt act. They were arrested and taken out of the city.
- Brigadier-General Dyer on hearing about the meeting, deployed his troops and ordered them to open fire. The only exit to the park was sealed and indiscriminate firing took place killing hundreds of innocent civilians.
Commission of Inquiry set up in the aftermath of the Jallianwala Bagh incident–
- It was on October 14, 1919, full six months after the Jallianwala Bagh massacre, that the Government of India, with approval of the Secretary of State for India, Edwin Montagu, instituted a committee to investigate not only the Jallianwala Bagh incident at Amritsar but also the disturbances which took place in Bombay, Delhi and Punjab.
- Accordingly the Disorders Inquiry Committee was set up with Lord William Hunter, a former Solicitor General of Scotland as the president with seven members.
- The report was presented on March 8, 1920 and was in the form of a majority report and a minority report.
- It later came to be known as the Hunter Commission after the name of chairman, Lord William Hunter. It also had Indian members.

How was the report received by the British government?

While broadly agreeing that disproportionate force had been used by Brig Gen Dyer at Jallianwala Bagh, the then Secretary of State for India, Edwin Montagu, was of the opinion that, “Brig Gen Dyer displayed honesty of purpose and unflinching adherence to his conception of his duty cannot for a moment be questioned”.
The then Viceroy, Lord Chemlsford, and his council called Gen Dyer’s actions as ‘bona fide’ and ‘dictated by a stern sense of duty’.
“In circumstances such as General Dyer was confronted with, an officer must act honestly and vigorously but with as much humanity as the case will permit,” Chelmsford’s council noted even as it recognized that Dyer had faltered.
As a consequence, the Commander-in-Chief of the Army directed Brig Gen Dyer to resign his appointment as Brigade Commander and informed him that he will receive no further employment in India.

The Indian National Congress appointed its own non-official committee that included Motilal Nehru, C.R. Das, Abbas Tyabji, M.R. Jayakar, and Gandhi to look into the shootings.

Gandhi soon began organizing his first large-scale and sustained nonviolent protest (satyagraha) campaign, the Non Cooperation Movement (1920–22)which proved a step in the direction of ending the British rule of India 25 years later.

2. Corporate Social Responsibility (CSR)

Subject – Governance

Context –The Ministry of Corporate Affairs has clarified that excess Corporate Social Responsibility (CSR) expenditure prior to FY21 cannot be set off against future CSR expenditure requirements and that corporate donations to government schemes cannot be counted as CSR.

Concept –

Companies with a minimum net worth of Rs 500 crore, turnover of Rs 1,000 crore, or net profit of Rs 5 crore are required to spend at least 2 per cent of their average profit for the previous three years on CSR activities every year.
Excess of the mandated 2 per cent expenditure prior to FY21 is not eligible to be set off against future CSR requirements.
The government had in May notified that donations made to the PM CARES fund on March 31, 2020 in excess of CSR requirements could be set off against CSR expenditure requirements for FY21.
The FAQs also clarify that companies are required to transfer any unspent CSR funds to a separate bank account which cannot be used for business purposes.
The clarification will also mean that any interest generated on unspent CSR funds will also have to be spent on CSR activities.

For more information on CSR, please refer to CSR.

3. Hari Singh Nalwa

Subject – History

Context – Hari Singh Nalwa, a legendary Sikh commander, tamed the turbulent forces at play in Afghanistan and earned the reputation of the most feared Sikh warrior there.

Concept –

He was one of the main and most trustworthy commanders of Maharaja Ranjit Singh’s force.
He remained Governor of Kashmir, Hazara and Peshawar.
He defeated various Afghans and established control over various regions along the boundary of Afghanistan and prevented Afghans from entering Punjab through Khyber pass, which was the main route to enter India by the foreign invaders from 1000 AD till early 19th century.
When Afghans were repeatedly coming to Punjab and Delhi, Maharaja Ranjit Singh decided to have a secure empire and he had formed two types of armies one organized by employing French, German, Italian, Russians Greeks etc. with modern type of weapons etc. and other army was under Hari Singh Nalwa, who was biggest strengths of Maharaja Ranjit Singh and who had defeated thousands of Hazars, a tribe of Afghanistan, with less than three times their strength.
For his bravery and ferocity, the government of India released a stamp on the name of Nalwa in 2013.
Hari Singh Nalwa participated in various battles against Afghans because of which Afghans lost their control over various Afghan-held territories and most of these battles were fought under the command of Hari Singh Nalwa.
- Like in 1807, at the age of 16, he participated in the battle of Kasur (now in Pakistan) and defeated Afghani ruler Kutab-ud-din Khan.
- In the Battle of Attock (in 1813) Nalwa along with other commanders won against Azim Khan and his brother Dost Mohammad Khan, who fought on behalf of Shah Mahmud of Kabul and this was the first major victory of the Sikhs over the Durrani Pathans.
- In 1818, Sikh army under Nalwa won the Battle of Peshawar and Nalwa asked to be stationed there.
- Nalwa took control over Jamrud in 1837, a fort at the entryway to Afghanistan through Khyber Pass.
- Historians said that in the battle of Jamrud, where Hari Singh Nalwa had died, Dost Muhammad Khan along with his five sons participated against Sikh army which was limited in number (around 600) with limited supplies.
He was also called ‘Bagh Maar’ (killer of tiger) after an attack by a tiger on him during a hunting expedition.
Then Maharaja Ranjit Singh after hearing this incident called him ‘Wah Mere Raja Nal Wah’. ‘Nal’ was a king in the epic Mahabharat who was noted for his bravery.
His father Gurdial Singh died when he was just seven in 1798 and his maternal uncle had raised him.

4. Islamic State Khorasan

Subject – Security

Context –Scores of people were killed in several explosions at Kabul’s Hamid Karzai Airport.

Concept –

The Afghan offshoot of the terror organization “Islamic State,” known as ISIS-Khorasan, IS-K or ISIS-K claimed responsibility for the attacks.
The group takes its name from the Khorasan Province, an area that once included wide swaths of Afghanistan, Iran and central Asia in the Middle Ages.
Jihadis divided by ideology, goals IS-K and the Taliban have been locked in bloody battles with one another for some time.
An ideological gulf separates the two militant groups. While the IS belongs to the Salafist movement of Islam; the Talibanadhere to the Deobandi school.
For IS-K, the Taliban’s views are not strict enough on Sharia Law.. IS fighters have called the Taliban apostates and bad Muslims because of their willingness to negotiate a peace deal with the United States. By doing so, they betrayed the goals of the jihad, IS fighters said.
IS-K has between 500 and 1,500 fighters in Afghanistan and has strengthened its positions in and around the capital, Kabul, where it carries out most of its attacks.
IS is also counting on an influx of fighters from Syria, Iraq and other conflict zones.
The IS-K took arms against the Taliban in 2017 when they drove the Taliban out of the mountainous Tora-Bora region. Tora-Bora’s deep tunnel system was where al-Qaeda chief Osama bin Laden had initially taken refuge from US retaliatory strikes following the September 11, 2001, attacks in the United States.
IS-K originally emerged in Pakistan as an armed student group belonging to the umbrella organization, Tehrik-i-Taliban Pakistan. Fearing persecution at home, they fled across the border to Afghanistan and pledged allegiance to the Islamic State and IS chief Baghdadi in 2014, who since has been killed.

5. Electoral Bonds

Subject – Polity

Context –Electoral bonds worth ₹3,429 cr redeemed in FY20: ADR report. Four national parties – the BJP, Congress, TMC and the NCP – accounted for 87%

Concept –

Introduced with the Finance Bill 2017, Electoral Bond isa financial instrument for making donations to political parties.
These bonds are on the lines of bearer bonds or promissory notes wherein the issuer (bank) is the custodian and pays the one who holds the bonds (political party)
The bonds are issued in multiples of Rs. 1,000, Rs. 10,000, Rs. 1 lakh, Rs. 10 lakh and Rs. 1 crore without any maximum limit.
State Bank of India is authorized to issue and encash these bonds, which are valid for fifteen days from the date of issuance.
These bonds are redeemable in the designated account of a registered political party.
The bonds are available for purchase by any person (who is a citizen of India or incorporated or established in India)for a period of ten days each in the months of January, April, July and October as may be specified by the Central Government.
A person being an individual can buy bonds, either singly or jointly with other individuals.
Donor’s name is not mentioned on the bond.
Only parties registered under the Representation of the People Act 1951 could receive donations through electoral bonds, and they also should not have secured less than 1% of the votes polled in the previous elections.

6. Environment Impact Assessment 2020

Subject – Environment

Context – The Centre on Friday told the Delhi High Court that it was willing to publish the draft Environment Impact Assessment 2020 in all the 22 languages in the Eighth Schedule of the Constitution

Concept –

EIA is an important process for evaluating the likely environmental impact of a proposed project. It is a process whereby people’s views are taken into consideration for granting final approval to any developmental project or activity. It is basically, a decision-making tool to decide whether the project should be approved or not.

The EIA process involves:

Screening: this stage decides which projects a full or partial assessment need study.
Scoping: this stage decides which impacts are necessary to be assessed. This is done based on legal requirements, international conventions, expert knowledge and public engagement. This stage also finds out alternate solutions.
Assessment & evaluation of impacts and development of alternatives: this stage predicts and identifies the environmental impacts of the proposed project and also elaborates on the alternatives.
EIA Report: in this reporting stage, an environmental management plan (EMP) and also a non-technical summary of the project’s impact is prepared for the general public. This report is also called the Environmental Impact Statement (EIS).
Decision making: the decision on whether the project is to be given approval or not and if it is to be given, under what conditions.
Monitoring, compliance, enforcement and environmental auditing: monitoring whether the predicted impacts and the mitigation efforts happen as per the EMP.

Key points of dispute with the proposed draft :

It shortens the period of public consultation hearings to a maximum of 40 days.
It reduces from 30 to 20 days the time provided for the public to submit their responses during a public hearing for any application seeking environmental clearance.
It also allows the declaration of some areas as “economically sensitive areas” without a public hearing or environmental clearance, and several “red” and “orange”-classified toxic industries could now operate as close as 0-5 km from a Protected Area in “callous disregard” for forests.
The increased validity of the environment clearances for mining projects (50 years versus 30 years currently) and river valley projects (15 years versus 10 years currently) raises the risk of irreversible environmental, social and health consequences on account of the project remaining unnoticed for long.

7. Pradhan Mantri Jan-Dhan Yojana (PMJDY)

Subject – Government Schemes

Context – The average amount deposited in the PM Jan Dhan (PMJDY) account has surged to Rs 3398 from Rs 1279 between 2015 and 2021. The total deposits under these accounts registered a rise of 6.38 times.

Concept –

Pradhan Mantri Jan-Dhan Yojana (PMJDY) is National Mission for Financial Inclusionto ensure access to financial services, namely, Banking/Savings & Deposit Accounts, Remittance, Credit, Insurance, Pension in an affordable manner.
Objectives:
- Ensure access of financial products & services at an affordable cost.
- Use of technology to lower cost & widen reach.
Basic tenets of the scheme
- Banking the unbanked– Opening of basic savings bank deposit (BSBD) account with minimal paperwork, relaxed KYC, e-KYC, account opening in camp mode, zero balance & zero charges.
- Securing the unsecured –Issuance of Indigenous Debit cards for cash withdrawals & payments at merchant locations, with free accident insurance coverage of Rs. 2 lakhs.
- Funding the unfunded –Other financial products like micro-insurance, overdraft for consumption, micro-pension & micro-credit.
Features
- Universal access to banking services –Branch and Banking Correspondents
- Basic savings bank accounts with overdraft facility of Rs. 10,000/- to every household.
- Financial Literacy Program–Promoting savings, use of ATMs, getting ready for credit, availing insurance and pensions, using basic mobile phones for banking.
- Creation of Credit Guarantee Fund –To provide banks some guarantee against defaults.
- Insurance –Accident cover up to Rs. 1,00,000 and life cover of Rs. 30,000 on account opened between 15 Aug 2014 to 31 January 2015.
- Pension Scheme for Unorganized sector.
There is no need to maintain minimum balance in these accounts.
Extension of PMJDY with New features:
- Focus shift from Every Household to Every Unbanked Adult.
- RuPay Card Insurance – Free accidental insurance cover on RuPay cards increased from Rs. 1 lakh to Rs. 2 lakhs for PMJDY accounts opened after 28.8.2018.
- Enhancement in overdraft facilities – OD limit doubled from Rs 5,000 to Rs 10,000; OD upto Rs 2,000 (without conditions). Increase in upper age limit for OD from 60 to 65 years.

8. Financial Stability and Development Council

Subject – Economy

Context – Union Finance Minister Nirmala Sitharaman will soon chair a meeting of the Financial Stability and Development Council (FSDC) to nudge financial regulators to relax and harmonise investment norms for instruments such as Infrastructure Investment Trusts (InvITs) to be used to monetise public assets such as highways, gas pipelines and railway tracks

Concept –

The Financial Stability and Development Council (FSDC) was constituted by an Executive Order of the Union Government as a non-statutory apex body under the Ministry of Finance in 2010.
Council Members
- The Finance Minister is the Chairman of the FSDC.
- Members of FSDC include Heads of the Financial Sector Regulators listed below:
- Reserve Bank of India (RBI)
- Insurance Regulatory and Development Authority (IRDA)
- Securities and Exchange Board of India (SEBI)
- Pension Fund Regulatory and Development Authority (PFRDA)
- Other members are Finance Secretary, Chief Economic Advisor and Secretary of the Department of Financial Services.
Member Reforms
- The government reconstituted the FSDC to include the following Members in the Council:
- Minister of State responsible for the Department of Economic Affairs (DEA)
- Secretary of the Department of Electronics and Information Technology
- Revenue Secretary
- Chairman of the Insolvency and Bankruptcy Board of India (IBBI)
- The reconstitution would make FSDC more broad-based to incorporate changes in the economic regulatory framework of the country.
Functions of FSDC
- The Financial Stability and Development Council was established as an autonomous body dealing with macro prudential and financial regularities in the entire financial sector of India.
- The body envisages to strengthen and institutionalize the mechanism of maintaining financial stability, financial sector development, inter-regulatory coordination along with monitoring macro-prudential regulation of the economy.
- It must be noted that no funds are separately allocated to the council for undertaking its activities.

9. Infrastructure Investment Trusts (InvITs)

Subject – Economy

Concept –

An Infrastructure Investment Trust (InvITs) is like a mutual fund, which enables direct investment of small amounts of money from possible individual/institutional investors in infrastructure to earn a small portion of the income as return.
InvITs work like mutual funds or real estate investment trusts (REITs) in features.
InvITs can be treated as the modified version of REITs designed to suit the specific circumstances of the infrastructure sector.
SEBI notified the SEBI (Infrastructure Investment Trusts) Regulations, 2014 providing for registration and regulation of InvITs in India.
The purpose of InvITs is to enable Infrastructure Companies to repay their debt obligation quickly and effectively. Since infrastructure-oriented projects tend to take time to generate substantial cash flow, InvITs come in handy for paying off loan interests and other expenses conveniently.

10. Deepar Beel

Subject – Environment

Context – On August 25, the Ministry of Environment, Forest and Climate Change notified the eco-sensitive zone of Deepar Beel Wildlife Sanctuary on the southwestern edge of Guwahati.

Concept –

Deepor Beel is located to the south-west of Guwahati city, in Kamrup district of Assam, India.
It is a permanent freshwater lake, in a former channel of the Brahmaputra River, to the south of the main river.
It is a wetland under the Ramsar Convention which has listed since November 2002, for undertaking conservation measures on the basis of its biological and environmental importance.
Considered as one of the largest beels in the Brahmaputra valley of Lower Assam, it is categorised as a representative of the wetland type under the Burma monsoon forest biogeographic region.
It is also an important bird sanctuary habituating many migrant species.
- Some of the unique migratory bird species that can be spotted here are the white-eyed pochard, the grey lag goose, Baer’s pochard and the gadwall, a dabbling duck.
It sustains a major population of wild elephants from the adjoining Rani Reserve Forest and DeeporBeel Wildlife Sanctuary.
The wetlands expand up to 30 sq. km in summer and reduces to about 10 sq. km in winter.
The wildlife sanctuary measures 4.1 sq. km within this wetland.
Mora Bharalu, an abandoned 13.5-km-long channel of the river Bharalu, which flows through the city, and the Basistha-Bahini rivers are the inlets that carry rainwater and untreated sewage to Deepor Beel.
The Rani and Garbhanga hills, the habitat of the Asiatic elephants in the southern side of the beel, are part of this ecosystem.

Eco-sensitive zone notification

The wetlands have for decades been threatened by a railway track — set to be doubled and electrified — on its southern rim, a garbage dump and encroachment for human habitation and commercial units
The notification specified an area “to an extent varying from 294 metres to 16.32 km” as the eco-sensitive zone with the total area being 148.9767 sq. km.

What does Eco-Sensitive Zone mean and what is its purpose?
Eco-Sensitive Zone means the fragile area that exists within 10 kilometres of protected areas like National Parks and Wildlife Sanctuaries. The purpose of marking an Eco-Sensitive Zone is to create a kind of shock-absorber around the protected areas.
Who declares the Eco-Sensitive Zone around protected areas?
The Eco-Sensitive Zone around protected areas are declared by the Ministry of Environment Forests and Climate Change (MoEFCC), Government of India.

Prohibited
Commercial mining, stone quarrying, crushing units, setting up industries that cause pollution, establishment of hydro-electric projects, commercial use of firewood, solid waste disposal or wastewater disposal and many other activities are prohibited or banned around ESZ.

11. Krishna Raja Sagar Dam

Subject – Geography

Context – The National Multi Class Youth Sailing Championship began in the backwaters of Krishnaraja Sagar dam in Mandya district on Friday. This is the first sailing championship of national magnitude to be held at the KRS.

Concept –

The Krishna Raja Sagar Dam was built across river Kaveri for the Mysore and Mandya districts in Karnatakain 1932.
The dam is named for the then ruler of the Mysore Kingdom, Krishnaraja Wodeyar IV.
The Dam is the creation of one of the greatest engineers that India had produced, Sir M. Vishweshwaraiah. His birthday, 15^thSeptember is celebrated as Engineers day.
The reservoir is also the main source of drinking water for all of Mysore city and almost the whole of Bangalore.
The water released from this dam is further used as an important source of water in the state of Tamil Nadu, and is stored in Mettur dam in the Salem district.

Type: It is a type of Gravity Dam.
Location: The dam is located below the confluence of river Kaveri with its tributaries Hemavati and Lakshmana Tirtha, in the district of Mandya in Karnataka.
Brindavan Gardens, an ornamental garden, is attached to the dam.

12. Parliamentary Outreach Programme for the Empowerment of Panchayati Raj Institutions

Subject – Polity

Context – Inaugurating the Parliamentary Outreach Programme for the Empowerment of Panchayati Raj Institutions, the Speaker appreciated the valour of the people of Ladakh.

Concept –

Lok Sabha Speaker Om Birla will inaugurate the Parliamentary Outreach programme for empowerment of Panchayati Raj institutions at Leh in the Union Territory of Ladakh today.
The programme is a unique initiative to strengthen the institutions of governance and planning at the grassroot level.
The broad objective of the parliamentary outreach programme for the Empowerment of Panchayati Raj Institutions is to create mass awareness/mass participation, self-confidence/ self-respect for the ground level leaders, creation of sense of ownership of the assets that have been created, fuelling the ambitions for grass root political leaders for democratic values, awareness about the various schemes and the doorstep delivery.

13. Black Holes

Subject – Science and Tech

Context – Indian astrophysicists spot rare merger of three jumbo black holes.

Concept –

It refers to a point in space where the matter is so compressed as to create a gravity field from which even light cannot escape.
The concept was theorized by Albert Einstein in 1915and the term ‘black hole’ was coined in the mid-1960s by American physicist John Archibald Wheeler.
Usually, the black holes belong to two categories:
- One category ranges between a few solar masses and tens of solar masses. These are thought to form when massive stars die.
- The other category is of super massive black holes. These range from hundreds of thousands to billions of times that of the sun from the Solar system to which Earth belongs.
In April 2019, the scientists at the Event Horizon Telescope Project released the first-ever image of a Black Hole (more precisely, of its shadow).
The Event Horizon Telescope is a group of 8 radio telescopes (used to detect radio waves from space) located in different parts of the world.
Gravitational waves are created when two black holes orbit each other and merge.

There’s a boundary at the edge of a black hole called the event horizon, which is the point of no return — any light or matter that crosses that boundary is sucked into the black hole. It would need to travel faster than the speed of light to escape, which is impossible.
Anything that crosses the event horizon is destined to fall to the very centre of the black hole and be squished into a single point with infinite density, called the singularity.

About the recent finding –

A rare merging of three super massive black holes has been spotted by a team of astrophysicists from the Indian Institute of Astrophysics (IIA), working with Professor Francoise Combes from the Paris Observatory.
This is only the third time such an event has been observed.
The team were observing the merging of two galaxies — NGC7733 and NGC7734 — in the earth’s celestial neighbourhood when they detected unusual emissions from the centre of the latter and a curious movement of a large bright clump within it, having a different velocity than that of NGC7733. Inferring that this was a separate galaxy, the scientists named it NGC7733N.
All three merging black holes were part of galaxies in the Toucan constellation.
They are quite far away given that the earth’s nearest galactic neighbour — the Andromeda galaxy — is 2.5 million light years away.

Final parsec –

In a press release, the team explains that if two galaxies collide, their black holes will also come closer by transferring the kinetic energy to the surrounding gas.
The distance between the black holes decreases with time until the separation is around one parsec (3.26 light-years).
The two black holes, however, are then unable to lose any further kinetic energy to get even closer and merge. This is known as the final parsec problem.

Many Active Galactic Nuclei (AGN), or super massive black hole at the centre of a galaxy, pairs have been detected in the past, but triple AGN are extremely rare, and only a handful have been detected before using X-ray observations.

14. Animal Discoveries 2020

Subject – Environment

Context – India added 557 new species to faunal wealth in 2020, says ZSI.

Concept –

India has added 557 new species to its fauna, which includes 407 new species and 150 new records, reveals Animal Discoveries 2020, a document published recently by the Zoological Survey of India (ZSI).
The number of faunal species in India has climbed to 1,02,718 species with the discovery of the new species.
Among the new species, some interesting species discovered in 2020 are
- Trimeresurus salazar, a green pit viper discovered in Arunachal Pradesh;
- Lycodon deccanensis, the Deccan wolf snake discovered in Karnataka; and
- Sphaerotheca Bengaluru, a burrowing frog named after the city of Bengaluru.
- The list also includes Xyrias anjaalai, a deep water species of snake eel from Kerala;
- Glyptothorax giudikyensis, a species of catfish from Manipur; and
- Clyster galateansis, a species of scarab beetle from the Great Nicobar Biosphere.

15. Sovereign Gold Bond Scheme

Subject – Economy

Context – The Reserve Bank of India (RBI) has announced the price for the Sovereign Gold Bond Scheme 202122 Series VI, which will be open for subscription August 30September 3.

Concept –

The Sovereign Gold Bond (SGB) scheme was launched in November 2015with an objective to reduce the demand for physical gold and shift a part of the domestic savings – used for the purchase of gold – into financial savings.
Issuance: The Gold Bonds are issued as Government of India Stock under the Government Securities (GS) Act, 2006.
These are issued by the RBI on behalf of the Government of India.
Bonds are sold through Commercial banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognized stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange, either directly or through agents.
Eligibility: The bonds are restricted for sale to resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions.
Issue Price: Gold bond prices are linked to the price of gold of 999 purity (24 carats) published by India Bullion and Jewellers Association (IBJA), Mumbai.
Investment Limit: Gold bonds can be purchased in the multiples of one unit, up to certain thresholds for different investors.
The upper limit for retail (individual) investors and HUFs is 4 kilograms (4,000 units) each per financial year. For trusts and similar entities, an upper limit of 20 kilograms per financial year is applicable.
Minimum permissible investment is 1 gram of gold.
Term: The gold bonds come with a maturity period of eight years, with an option to exit the investment after the first five years.
Interest Rate: A fixed rate of 5% per annum is applicable on the scheme, payable semi-annually.
The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961.
Benefit:
- Bonds can be used as collateral for loans.
- The capital gains tax arising on redemption of SGB to an individual has been
- Redemption is the act of an issuer repurchasing a bond at or before maturity.
- Capital gain is the profit earned on the sale of an asset like stocks, bonds or real estate. It results in when the selling price of an asset exceeds its purchase price.
Disadvantages of Investing in SGB:
- This is along term investment unlike physical gold which can be sold immediately.
- Sovereign gold bonds are listed on exchange but the trading volumes are not high, therefore it will be difficult to exit before maturity.

16. Tapering

Context:

Fed Chair Jerome Powell’s Jackson Hole speech was a balanced outline on the economy even as it confirmed the advent of QE tapering before the end of 2021.

Concept:

Quantitative Easing:

QE refers to an unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply.
Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.
QE helps the economy by reducing the long-term interest rates, thus making business and mortgage borrowing cheaper thus giving a signal that the US Fed wants to support the economy.

Tapering:

Tapering is the gradual slowing of the pace of the Fed’s large scale asset purchases. Once the tapering is complete then the Fed may go for reduction in the size of the balance sheet. The aim is to slowly remove the monetary stimulus.
Impact of tapering
Outflow of FPI can take place.