What are G-Sec Yields?

Government Securities (G-Secs) yields are at an all-time high.

What are G-Secs?

These are debt instruments issued by the government to borrow money.

The two key categories are:

Treasury bills (T-Bills) – short-term instruments which mature in 91 days, 182 days, or 364 days, and

Dated securities – long-term instruments, which mature anywhere between 5 years and 40 years

Why G-Secs?

Like bank fixed deposits, g-secs are not tax-free.

They are generally considered the safest form of investment because they are backed by the government. So, the risk of default is almost nil.

However, they are not completely risk-free, since they are subject to fluctuations in interest rates.

Bank fixed deposits, on the other hand, are guaranteed only to the extent of Rs 5 lakh by the Deposit Insurance and Credit Guarantee Corporation (DICGC).

How are G-sec yields calculated?

G-sec yields change over time; often several times during a single day.

This happens because of the manner in which G-secs are structured.

Every G-sec has a face value, a coupon payment and price.

The price of the bond may or may not be equal to the face value of the bond.

Here’s an example: Suppose the government floats a 10-year G-sec with a face value of Rs 100 and a coupon payment of Rs 5.

If one were to buy this single G-sec from the government, it would mean that one will give Rs 100 to the government today and the government will promises to 1) return the sum of Rs 100 at the end of tenure (10 years), and 2) pay Rs 5 each year until the end of this tenure.

At this point, the face value of this G-sec is equal to its price, and its yield (or the effective interest rate) is 5%.

How do G-sec yields go up and down?

Imagine a scenario in which the government floats just one G-sec, and two people want to buy it.

Competitive bidding will ensue, and the price of the bond may rise from Rs 100 (its face value) to Rs 105.

Now imagine another lender in the picture, which pushes the price further up to Rs 110.

What do G-sec yields show?

If G-sec yields (say for a 10-year bond) are going up, it would imply that lenders are demanding even more from private sector firms or individuals; that’s because anyone else is riskier when compared to the government.

It is also known that when it comes to lending, interest rates rise with the rise in risk profile.

As such, if G-sec yields start going up, it means lending to the government is becoming riskier.

If you read that the G-sec yields are going up, it suggests that the bond prices are falling. But the prices are falling because fewer people want to lend to the government.

And that in turn happens when people are worried about the government’s finances (or its ability to pay back).

The government’s finances may be in trouble because the economy is faltering and it is unlikely that the government will meet its expenses.

By the reverse logic, if a government’s finances are sorted, more and more people want to lend money to such a G-sec.

This in turn, leads to bond prices going up and yields coming down.

GST revenues surpass ₹1.44 lakh crore

India recorded its second-highest monthly gross GST revenues in June at ₹1,44,616 crore, 56% more than a year earlier when the second COVID wave had hit economic activity.

What is GST?

GST is an indirect tax that has replaced many indirect taxes in India such as excise duty, VAT, services tax, etc.

The Goods and Service Tax Act was passed in Parliament on 29th March 2017 and came into effect on 1st July 2017. It is a single domestic indirect tax law for the entire country.

It is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.

Under the GST regime, the tax is levied at every point of sale. In the case of intra-state sales, Central GST and State GST are charged. All the inter-state sales are chargeable to the Integrated GST.

What are the components of GST?

There are three taxes applicable under this system:

CGST: It is the tax collected by the Central Government on an intra-state sale (e.g., a transaction happening within Maharashtra)

SGST: It is the tax collected by the state government on an intra-state sale (e.g., a transaction happening within Maharashtra)

IGST: It is a tax collected by the Central Government for an inter-state sale (e.g., Maharashtra to Tamil Nadu)

Advantages Of GST

GST has mainly removed the cascading effect on the sale of goods and services.

Removal of the cascading effect has impacted the cost of goods.

Since the GST regime eliminates the tax on tax, the cost of goods decreases.

Also, GST is mainly technologically driven.

All the activities like registration, return filing, application for refund and response to notice needs to be done online on the GST portal, which accelerates the processes.

Issues with GST

High operational cost

GST has given rise to complexity for many business owners across the nation.

GST has received criticism for being called a ‘Disability Tax’ as it now taxes articles such as braille paper, wheelchairs, hearing aid etc.

Petrol is not under GST, which goes against the ideals of the unification of commodities.

DRDO tests Autonomous Flying Wing Technology Demonstrator

The Defence Research and Development Organisation (DRDO) has successfully carried out the maiden test flight of a new Unmanned Aerial Vehicle (UAV), an autonomous Flying Wing Technology Demonstrator, from the Aeronautical Test Range, Chitradurga, Karnataka.

About the Indigenous Drone

The Unmanned Aerial Vehicle (UAV) is powered by a small turbofan engine.

It is developed under unmanned combat aerial vehicle (UCAV) programme.

It is designed and developed by Aeronautical Development Establishment (ADE), Bengaluru, a premier research laboratory of DRDO.

The engine is Russian TRDD-50MT originally designed for cruise missiles.

A small turbo fan engine is being developed indigenously for meeting the requirement.

Various initiatives by DRDO

DRDO is in the process of developing UAVs of different classes to met the requirements of the armed forces.

Rustom-2, the indigenous Medium Altitude Long Endurance (MALE) UAV under development, had crossed a milestone by reaching an altitude of 25,000 feet and an endurance of 10 hours.

It is now being designed to reach an altitude of 30,000 feet and 18 hours endurance.

An Unmanned Combat Aerial Vehicle is also on the drawing board.

Significance of the development

Operating in a fully autonomous mode, the aircraft exhibited a perfect flight, including take-off, way point navigation and a smooth touchdown.

This flight marks a major milestone in terms of proving critical technologies towards the development of future unmanned aircraft.

This is a significant step towards self-reliance in strategic defence technologies.

Puri Rath Yatra

Lakhs of devotees thronged the coastal town of Puri town to witness the annual Rath Yatra with three decorated chariots of sibling deities Lord Balabhadra, Lord Jagannath and Devi Subhadra towed in front of the 12th century Shree Jagannath Temple.

About Jagannath Rath Yatra

Ratha Jatra, the Festival of Chariots of Lord Jagannatha is celebrated every year at Puri, the temple town in Orissa, on the east coast of India.

It involves a public procession with a chariot with deities Jagannath (Vishnu avatar), BalaBhadra (his brother), Subhadra (his sister) and Sudarshana Chakra (his weapon) on a ratha, a wooden deula-shaped chariot.

The huge, colourfully decorated chariots, are drawn by hundreds and thousands of devotees on the bada danda, the grand avenue to the Gundicha temple, some two miles away to the North.

It attracts over a million Hindu pilgrims who join the procession each year.