{"id":28149,"date":"2024-02-19T09:36:16","date_gmt":"2024-02-19T09:36:16","guid":{"rendered":"https:\/\/edukemy.com\/blog\/?p=28149"},"modified":"2024-02-19T09:36:18","modified_gmt":"2024-02-19T09:36:18","slug":"upsc-prelims-2022-question-5","status":"publish","type":"post","link":"https:\/\/edukemy.com\/blog\/upsc-prelims-2022-question-5\/","title":{"rendered":"UPSC Prelims 2022 &#8211; Question 5"},"content":{"rendered":"\n\n\n<p>Here is  Question No. 5 a part of our series on UPSC Prelims 2022.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_73 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<label for=\"ez-toc-cssicon-toggle-item-69e2ef89e97fb\" class=\"ez-toc-cssicon-toggle-label\"><p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-cssicon\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69e2ef89e97fb\"  \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/edukemy.com\/blog\/upsc-prelims-2022-question-5\/#Q5_With_reference_to_the_Indian_economy_what_are_the_advantages_of_%E2%80%9CInflation-Indexed_Bonds_IIBs%E2%80%9D\" title=\"Q5. With reference to the Indian economy, what are the advantages of \u201cInflation-Indexed Bonds (IIBs)\u201d?\">Q5. With reference to the Indian economy, what are the advantages of \u201cInflation-Indexed Bonds (IIBs)\u201d?<\/a><\/li><\/ul><\/nav><\/div>\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Q5_With_reference_to_the_Indian_economy_what_are_the_advantages_of_%E2%80%9CInflation-Indexed_Bonds_IIBs%E2%80%9D\"><\/span>Q5. With reference to the Indian economy, what are the advantages of \u201cInflation-Indexed Bonds (IIBs)\u201d?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ol class=\"wp-block-list\"><li>The government can reduce the coupon rates on its borrowing by way of IIBs.<\/li><li>IIBS provide protection to investors from uncertainty regarding inflation.<\/li><li>The interest received as well as capital gains on IIBs are not taxable.<\/li><\/ol>\n\n\n\n<p>Which of the statements given above are correct?<\/p>\n\n\n\n<p>a) 1 and 2 only<\/p>\n\n\n\n<p>b) 2 and 3 only<\/p>\n\n\n\n<p>c) 1 and 3 only<\/p>\n\n\n\n<p>d) 1, 2 and 3<\/p>\n\n\n\n<p>Answer &#8211; A<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Statement 1 is correct:<\/strong> As IIBs are G-Secs, they can be tradable in the secondary market like other G-Secs. G-Secs helps the Government to reduce the coupon rates on its borrowing. Like other G-Secs, coupon on IIBs would be paid on a half-yearly basis. Fixed coupon rate would be paid on the adjusted principal.Since these bonds provide no risk of capital loss, they can offer a lesser rate of interest (coupon) as interest is directly proportional to risk.<\/li><li><strong>Statement 2 is correct: <\/strong>These instruments protect savings from inflation. It has been decided by the RBI to consider WPI for inflation protection in IIBs.Inflation-indexed bonds provide protection to investors from uncertainty regarding inflation.<\/li><li><strong>Statement 3 is incorrect:<\/strong> Extant tax provisions will be applicable on interest payment and capital gains on IIBs. There will be no special tax treatment for these bonds. Interest and inflation compensation both are taxable.<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-image size-full\"><a href=\"https:\/\/edukemy.com\/free-resources-for-upsc?utm_source=Blog&amp;utm_medium=Banner&amp;utm_campaign=Resources\" target=\"_blank\" rel=\"noreferrer noopener\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1280\" height=\"300\" src=\"https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/06\/18.png\" alt=\"\" class=\"wp-image-42398\" srcset=\"https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/06\/18.png 1280w, https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/06\/18-1170x274.png 1170w, https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/06\/18-585x137.png 585w\" sizes=\"(max-width: 1280px) 100vw, 1280px\" \/><\/a><\/figure>\n\n\n\n<p>For UPSC Prelims Resources,&nbsp;<a href=\"https:\/\/edukemy.com\/upsc-cse-prelims-resource-centre\" target=\"_blank\" rel=\"noreferrer noopener\">Click here<\/a><\/p>\n\n\n\n<p>For Daily Updates and Study Material:<\/p>\n\n\n\n<p>Join our Telegram Channel \u2013&nbsp;<a href=\"https:\/\/t.me\/WithEdukemy4IAS\" target=\"_blank\" rel=\"noreferrer noopener\">Edukemy for IAS<\/a><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>1. Learn through Videos \u2013&nbsp;<a href=\"https:\/\/bit.ly\/3vOD8sU\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a><\/li><li>2. Be Exam Ready by Practicing Daily MCQs \u2013&nbsp;<a href=\"https:\/\/bit.ly\/3Q9z2nF\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a><\/li><li>3. Daily Newsletter \u2013 Get all your Current Affairs Covered \u2013&nbsp;<a href=\"https:\/\/bit.ly\/3bE2y5J\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a><\/li><li>4. Mains Answer Writing Practice \u2013&nbsp;<a href=\"https:\/\/bit.ly\/3mZuVxl\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a><\/li><\/ul>\n\n\n\n<p>Visit our YouTube Channel \u2013&nbsp;<a href=\"https:\/\/www.youtube.com\/@ShabbirsEduKemyforIAS\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Q5. With reference to the Indian economy, what are the advantages of \u201cInflation-Indexed Bonds (IIBs)\u201d?<\/p>\n<p>The government can reduce the coupon rates on its borrowing by way of IIBs.<\/p>\n","protected":false},"author":17,"featured_media":28154,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_eb_attr":"","om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[1644],"tags":[232,515,231],"class_list":["post-28149","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-upsc-prelims","tag-upsc","tag-upsc-cse","tag-upsc-prelims"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/posts\/28149","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/users\/17"}],"replies":[{"embeddable":true,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/comments?post=28149"}],"version-history":[{"count":1,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/posts\/28149\/revisions"}],"predecessor-version":[{"id":28153,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/posts\/28149\/revisions\/28153"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/media\/28154"}],"wp:attachment":[{"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/media?parent=28149"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/categories?post=28149"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/tags?post=28149"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}