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  • Parliament – Sessions, Procedures, Motions, Committees etc

    New Parliament Building

    | Polity | Mains Paper 2: Parliament & State Legislatures

    PM would on December 10 lay the foundation stone for the new Parliament building, which would be a symbol of “Atmanirbhar Bharat” and a “temple of democracy” for Independent India.

    Try this MCQ first:

    Q.The architecture of the present Parliament House of India is inspired from:

    a) Ekattarso Mahadeva Temple

    b) Virupaksa Temple

    c) Dilwara Temples

    d) Brihaddeswara Temple

    The new Parliament Building

    • The building, to be constructed by Tata Projects Ltd. would have a built-up area of 64,500 square metres over four floors and would be built adjacent to the existing building over 22 months.
    • Artisans and sculptors from across the country would contribute to the new building, showcasing the diversity and making it a symbol of “Atmanirbhar Bharat”.
    • The building would have modern equipment, be earthquake-safe and accommodate up to 1,224 MPs during joint sessions in the Lok Sabha chamber.
    • The Lok Sabha and the Rajya Sabha chambers themselves would accommodate 888 and 384 MPs respectively.

    Issues with the old building

    • The existing British-built Parliament building, built in the 1920s, was designed for the Imperial Legislative Council and not for a bicameral Parliament.
    • The building has been modified over the years, including in 1956 when two floors were added.
    • While the number of Lok Sabha seats has remained 545 based on delimitation carried out on the basis of the 1971 Census, it is likely to increase after 2026 as the number of seats has been frozen till then.
    • The sources said the Lok Sabha and the Rajya Sabha halls are packed and would not be able to accommodate additional seats when the number of seats goes up.

    Back2Basics: Parliament House (Sansad Bhavan)

    • The Sansad Bhavan is the seat of the Parliament of India. It houses the Lok Sabha and the Rajya Sabha which represent lower and upper houses respectively in India’s bicameral parliament.
    • The existing building draws inspiration from Ekattarso Mahadeva Temple (in M.P.) and was built under the British empire for its Imperial Legislative Council in 1927.
    • The opening ceremony, which then housed the Imperial Legislative Council, was performed on 18 January 1927 by Lord Irwin, Viceroy of India.
    • Following the end of British rule in India, it was taken over by Constituent Assembly of India which was succeeded by the parliament of India once Constitution of India came into force in 1950.
    • In the 2010s, a proposal was introduced to revamp Central Vista and re-build or relocate a number of administrative buildings which initiated a program expecting completion in 2024.

    Architectural details:

    • Originally called the House of Parliament, it was designed by the British architects’ Edwin Lutyens and Herbert Baker in 1912-1913.
    • It was held as part of their wider mandate to construct a new administrative capital city for British India.
    • The perimeter of the building is circular, with 144 columns on the outside.
    • The building is surrounded by large gardens and the perimeter is fenced off by sandstone railings (jali).
    • Construction of the House began in 1921 and it was completed in 1927.

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  • Coal and Mining Sector

    Rat Hole Mining in Meghalaya

    | Enviro & Biodiversity | Mains Paper 3:

    Rat-hole coal mining had sucked the life out of a village in Meghalaya’s East Jaintia Hills district.

    Q.Despite a ban, rat-hole mining continues to prevail as an important practice in Meghalaya. What are the issues associated with it? Discuss. (150W)

    Rat Hole Mining

    • It is a primitive and hazardous method of mining for coal, with tunnels that are only 3-4 feet in diameter (hence, rat-hole), leading to pits ranging from 5-100 sq. mt deep.
    • It involves digging of very small tunnels in which workers, more often children, enter and extract coal.
    • Although the coal is of bad quality, people see it as a treasure chest.
    • In backward regions, where there is the loss of livelihood, lack of employment opportunities and under-education, people see rat-hole mines as an opportunity to earn daily bread.
    • A major portion of these employees are children, who are preferred because of their thin body shape and ease to access depths.

    Despite a ban

    The National Green Tribunal banned rat-hole mining in Meghalaya in 2014 on a petition that said acidic discharge from the mines was polluting the Kopili River. But the practice continues unabated.

    Threats of such mining

    • Water from rivers and streams in the mining area has become unfit for drinking and irrigation and is toxic to plants and animals.
    • Layers of rock above the coal removed during mining contain traces of iron, manganese and aluminium that get dissolved from mining sites through the acid run-off or are washed into streams as sediment.
    • There are several mishaps where workers get trapped to death due to the sudden collapse of such mines.

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  • GI(Geographical Indicator) Tags

    Himachal wants GI status for five products

    Prelims Only | Economics | Mains Paper 3: Intellectual Property Rights

    The Himachal Pradesh government is trying to obtain GIs for five products from the state – Karsog Kulth, Thangi of Pangi, Chamba Metal Crafts, Chamba Chukh, and Rajmah of Bharmour.

    Read more about GIs at:

    GI(Geographical Indicator) Tags

    Which are the five HP products?

    • Karsog Kulth: Kulthi or Kulth (horse gram) is a legume grown as a kharif crop in Himachal Pradesh. Kulth grown in the Karsog area of Mandi district is believed to be particularly rich in amino acids.
    • Pangi ki Thangi: It is a type of hazelnut which grows in Pangi valley located in the northwestern edge of Himachal. It is known for its unique flavour and sweetness.
    • Chamba metal crafts: These include items such as metal idols and brass utensils which, historically, were made by skilled artisans in the courts of kings of Chamba. There are efforts to revive the trade, and a plate made from a brass-like alloy and having carvings of gods and goddesses is still popular.
    • Chamba Chukh: It’s a chutney made from green and red chillies grown in Chamba, and prepared in traditional and unique ways. The practice has largely declined in rural households of Chamba, but survives to some extent at the small-scale industrial level.
    • Bharmouri Rajmah: It’s more specifically called the Kugtalu Rajmah, since it grows in the area around Kugti Pass in the Bharmour region of Chamba district. It is rich in proteins and has a unique flavor.

    How many registered GIs does Himachal currently have?

    • They are eight in number.
    • It includes four handicrafts (Kullu Shawl, Chamba Rumal, Kinnauri Shawl and Kangra Paintings).
    • There are three agricultural products (Kangra Tea, Basmati and Himachali Kala Zeera) and one manufactured product (Himachali Chulli Oil).
    • Kullu Shawl and Kangra Tea were the first to be registered in 2005-06.
    • Basmati has been registered jointly from seven states of North India, including Himachal Pradesh.
    • Chulli (apricot) oil and kala jeera (cumin), mainly associated with Kinnaur and known for their medicinal properties, were the last to be registered in 2018-19.

    How does a GI tag help?

    • A GI tag provides a better market for these products and prevents misuse of the name.
    • A GI registration is given to an area, not a trader, but once a product gets the registration, traders dealing in the product can apply for selling it with the GI logo.
    • Authorised traders are each assigned a unique GI number. For example, Kullu shawl has 135 authorised traders. A shawl made in Ludhiana cannot be sold as a Kullu shawl.
    • If any unauthorised trader, even from Kullu, tries to sell a shawl under the name of Kullu shawl, he or she can be prosecuted under The Geographical Indications of Goods (Registration and Protection) Act, 1999.
    • GIs are also expected to boost or revive the items whose production has declined, as is being aimed in the case of Chamba Chukh and metal crafts.

    Back2Basics: Geographical Indication (GI)

    • The World Intellectual Property Organisation defines a GI as “a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin”.
    • GIs are typically used for agricultural products, foodstuffs, handicrafts, industrial products, wines and spirit drinks.
    • Internationally, GIs are covered as an element of intellectual property rights under the Paris Convention for the Protection of Industrial Property.
    • They are also covered under the Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement.
    • Presently, there are 370 registered GIs in India.

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  • Modern Indian History-Events and Personalities

    Places in news: Temple architecture of Hampi

    National Parks/WS | History | Mains Paper 1: Arts & Culture

    Tourists can no longer get too close to the iconic stone chariot in front of the Vijaya Vittala Temple due to a protective ring by the Archaeological Survey of India (ASI).

    Try this question from CSP 2019:

    Q.Building ‘Kalyaana Mandapas’ was a notable feature in the temple construction in the kingdom of

    (a) Chalukya

    (b) Chandela

    (c) Rashtrakuta

    (d) Vijayanagara

    The Vijayanagara Capital: Hampi

    • Hampi or Hampe, also referred to as the Group of Monuments at Hampi, is a UNESCO World Heritage Site located in east-central Karnataka.
    • Hampi was the capital of the Vijayanagara Empire in the 14th century.
    • The old city of Hampi was a prosperous, wealthy and grand city near the Tungabhadra River, with numerous temples, farms and trading markets.
    • By 1500 CE, Hampi-Vijayanagara was the world’s second-largest medieval-era city after Beijing, and probably India’s richest at that time, attracting traders from Persia and Portugal.
    • The Vijayanagara Empire was defeated by a coalition of sultanates; its capital was conquered, pillaged and destroyed by sultanate armies in 1565, after which Hampi remained in ruins.

    Major attractions

    • The Krishna temple complex, Narasimha, Ganesa, Hemakuta group of temples, Achyutaraya temple complex, Vitthala temple complex, Pattabhirama temple complex, Lotus Mahal complex, can be highlighted.
    • Suburban townships (puras) surrounded the large temple complexes contains subsidiary shrines, bazaars, residential areas and tanks applying the unique hydraulic technologies.
    • The Vitthla temple is the most exquisitely ornate structure on the site and represents the culmination of Vijayanagara temple architecture.
    • It is a fully developed temple with associated buildings like Kalyana Mandapa and Utsava Mandapa within a cloistered enclosure pierced with three entrance Gopurams.
    • In addition to the typical spaces present in contemporary temples, it boasts of a Garuda shrine fashioned as a granite ratha and a grand bazaar street.

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  • Climate Change Impact on India and World – International Reports, Key Observations, etc.

    Species in news: Red Sea Turtles

    Prelims Only | Enviro & Biodiversity | Mains Paper 1: Important Geophysical Phenomena

    Turtle populations in the Red Sea could be turning overwhelmingly female because of a rise in sea temperatures caused due to anthropogenic climate change, a new study has showed.

    Try this PYQ:

    Q.Consider the following fauna of India:

    1. Gharial
    2. Leatherback turtle
    3. Swamp deer

    Which of the above is/are endangered?

    (a) 1 and 2 only

    (b) 3 only

    (c) 1, 2 and 3

    (d) None

    Red Sea Turtles

    • There are seven extant species worldwide, five of which can be found in the Red Sea: the green turtle, the hawksbill turtle, the loggerhead turtle, the olive ridley turtle and the leatherback turtle.
    • In order to maintain a 50:50 ratio of male and female in the population, a temperature of 29.2 degrees Celsius is pivotal.
    • Above this, hatchlings would be predominantly female.
    • The sand temperatures at four of the sites exceeded 29.2 degrees; leading the team to the conclusion that ‘feminization’ of the population could be already happening.

    Their significance

    • Marine turtles—as all top predators—have a prominent role in maintaining balanced and healthy ecosystems, in particular seagrass beds and coral reefs.
    • They also help in transporting nutrients towards naturally nutrient-poor ecosystems (the nesting beaches), and providing food and transportation for other marine species (e.g., barnacles and commensal crabs).
    • Marine turtles also play an important role in the economy of the tourism industry.

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  • Monetary Policy Committee Notifications

    RBI keeps repo rate unchanged

    | Economics | Mains Paper 3: Indian Economy

    The MPC decided on Friday to leave the Repo rate unchanged at 4%. However, the RBI faces a dilemma over the excess liquidity in the economy while tackling inflation.

    Limits of monetary  policy

    • Even though our economy slumped into a recession in the first half of 2020-21, there seems little further RBI can do with monetary policy to spur growth.
    • Its monetary decision to leave its main policy rate unchanged at 4%, the rate at which it lends money to banks, thus seems appropriate.
    • This is because retail inflation has hovered above its 6% upper tolerance limit for much of this year.
    • It is the first time its 2016-adopted price-stability framework looks poised for failure.
    • Meanwhile, it has announced wider coverage of an earlier scheme by which banks buy bonds issued by firms in specific stressed sectors–a way to ease credit.

    Poor credit demand

    • Supply-side measures have their limits of efficacy, with aggregate demand observed to be in a bad way and investments restrained by uncertainty.
    • Therefore, RBI’s focus had to shift to the inflationary effects of excess liquidity detected in the economy.
    • Oddly, this doesn’t seem to have happened.
    • With over ₹6 trillion still being parked daily by banks with RBI at its reverse repo window, a reflection of poor credit demand.

    Dilemma RBI faces in maintaining low interest rate

    • Plus, India has seen a large sum of dollars coming into India.
    • To keep the rupee’s global value stable and Indian exports competitive, RBI has been buying those dollars, thus raising our foreign exchange reserves and pumping more liquidity into the domestic arena.
    • Sterilizing the inflationary effect of this usually requires bonds to be sold, which increases their market supply and pressures yields up-a dilution of its stance on easy money.
    • This poses a dilemma that RBI may soon have to grapple with.
    • RBI’s core task as a central bank, of watching both the external and internal stability of the currency under its charge, may get more complex than ever if capital inflows stay high, global investors see an opportunity in ‘carry trade’ profits, and price trends don’t go by its expectations.

    Conclusion

    If India’s broad policy frame is being pushed by our covid crisis towards a major reset, with the Centre’s fisc granted a freer run and its debt burden to be partially inflated away over the years, then that would call for another debate.

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  • Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

    The many layers to agricultural discontent

    op-ed snap | Agriculture | Mains Paper 3: Transport & Marketing Of Agricultural Produce

    Farmers protest against the Farm laws is based on the multiple reasons. The article analyses these concerns of the protesting farmers.

    Three farm laws and response to it

    • Three Farm Bills were passed by the Central government in September 2020.
    • In the process, the regulatory role the state played hitherto with regard to these issues was watered down to a great extent.
    • Apart from complex challenges that rural India confronts today, there is a substantial body of studies that demonstrates how the vagaries of the market and the role of the middlemen reinforce agrarian distress in India.
    • However, organised farmers’ bodies are not in sync with the reasoning of the government.

    Role of the states

    • There is a debate around the constitutional provisions with regard to the respective domains of the State and the Union with regard to agricultural marketing,
    • However, issues affecting the farming community have a far greater bearing on the States relative to the Centre.
    • Ideally, given its immediacy, the States are the apt agencies to respond to a host of concerns faced by the farming community, which includes agricultural marketing.
    • While enacting the Farm Bills, the Centre extended little consideration to the sensitivity of the States.

    Role of APMC

    • In Punjab and Haryana, tweaking the APMC system and its resultant bearing on Minimum Support Price (MSP) is seen by the farmers as a threat to an assured sale of their produce at a price.
    • MSP system provides a cushion, wherein the farmer can anticipate the cost of opting for these crops and tap the necessary supports through channels he has been familiar with.
    • Farmers are apprehensive of the vagaries of a competitive market where he would eventually be beholden to the large players including monopolies.
    • There is widespread apprehension that the measures proposed by the Farm Acts in addition to the existing agrarian distress, are only going to make the lot of the farmer even more precarious.
    • All across the country, the farming community is prone to sympathise with the demand to scrap the new laws, as they have little to offer to them in a positive sense.

    Conclusion

    Those with large holdings and produce for the market — are spearheading the present stand-off against the Farm Bills, as it affects them very deeply. But farming distress is shared in common by the different strata within the farming community, even though it has a differential impact on them.

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  • Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

    Perils of profits based economic recovery

    op-ed snap | Economics | Mains Paper 3: Indian Economy

    The economies across the world are showing recovery driven by profits. However, one cannot neglect the implication of such recovery for the long term growth given the pressure such recovery has been exerting on the labour markets. The article deals with this issue.

    3 Ways to look at GDP

    • The first is what they tell us about the past.
    • Here, the news has generally been better-than-expected.
    • The US and India saw a much stronger recovery last quarter than previously envisioned.
    • The second is sectoral, production side-agriculture, manufacturing, services- and the functional, expenditure side consumption, investment, net exports.
    • But there’s a third way — the income side.
    • Value addition must ultimately accrue to the different factors of production.
    • On the income side, therefore, GDP is simply the sum of profits, wages and indirect taxes.

    Profit-driven growth and impact on employment

    • The economic recovery in many parts of the world is driven disproportionately by capital than labour.
    • In India, the net profits of listed companies grew 25 per cent (in real terms) last quarter. This despite revenues shrinking.
    • Revenue shrank because firms aggressively cut costs, including employee compensation.
    • This implies that if listed company profits are growing 25 per cent, and yet GDP contracted 7.5 per cent, it reveals (by construction) significant pressure on profits of unlisted SMEs, wages and employment.
    • Labour market pressures are evident in India too.
    • Household demand for MGNREGA remains very elevated, suggesting significant labour market slack.
    • The employment rate in some labour market surveys still reveal about 14 million fewer employed compared to February, and nominal wage growth across a universe of 4,000 listed firms has slowed from about 10 per cent to 3 per cent over the last six quarters.

    Why this matters

    • It may be rational for any one firm to boost profits by cutting employee compensation.
    • But if every firm pursued that strategy, that simply reduces future aggregate demand and profitability for all firms.
    • This is quintessential fallacy of composition that Keynes enumerated.
    • Weak demand, in turn, disincentivises re-hiring, reinforcing the risks of settling into a sub-optimal equilibrium.

    Need to remain vigilant about labour market

    • Remaining vigilant about labour markets is particularly important for India.
    • Private consumption was increasingly financed by households running down savings and taking on debt pre-COVID-19.
    • Consequently, if job-market pressures induce households into perceiving this shock as a quasi-permanent hit on incomes, households will be incentivised to save, not spend in the future.

    Way forward for fiscal consolidation

    • While economic momentum is expected to slow as pent-up demand wears off, the level of output will progressively reach pre-COVID levels as the economy normalises.
    • The question is what will drive growth after that?
    • India’s fiscal response has been restrained thus far, with the Centre’s total spending similar to last year and state capex under pressure.
    • It’s therefore important for the Centre to step up spending in the remaining months.
    • More importantly, public investment, and a large infrastructure push, must be the leitmotif of the next budget.
    • This will be crucial to boost demand, create jobs, crowd-in private investment and improve the economy’s external competitiveness.
    • If higher infrastructure spending is financed by higher asset sales, the headline fiscal deficit (which matters for bond markets and interest rates) can be slowly reduced, even as the underlying fiscal impulse (which matters for growth and jobs) remains positive.
    • This is the only way to undertake fiscal consolidation without incurring a fiscal drag.
    • Monetary policy has led the charge in 2020. But with inflation continuing to remain sticky and elevated, the RBI has fewer degrees of freedom going forward.

    Conclusion

    The stronger-than-expected GDP print is very encouraging. But this is the start of a long journey back. Much, therefore, remains to be done. The excitement around the vaccine shouldn’t obscure this fundamental premise.

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  • Health Sector – UHC, National Health Policy, Family Planning, Health Insurance, etc.

    UN removes Cannabis from ‘Most Dangerous Drug’ Category

    IOCR | International Relations | Mains Paper 2: Health & Education

    The United Nations Commission on Narcotic Drugs (CND) voted to remove cannabis and cannabis resin from Schedule IV of the 1961 Single Convention on Narcotic Drugs, decades after they were first placed on the list.

    Q. Too much de-regulation of Cannabis could lead to its mass cultivation and a silent economy wreaking havoc through a new culture of substance abuse in India. Critically analyse.

    What is Cannabis?

    • Cannabis, also known as marijuana among other names, is a psychoactive drug from the Cannabis plant used primarily for medical or recreational purposes.
    • The main psychoactive component of cannabis is tetrahydrocannabinol (THC), which is one of the 483 known compounds in the plant, including at least 65 other cannabinoids, including cannabidiol (CBD).
    • It is used by smoking, vaporizing, within the food, or as an extract.

    UN’s decision and India

    • Currently in India, the Narcotic Drugs and Psychotropic Substances (NDPS) Act, 1985, illegalizes any mixture with or without any neutral material, of any of the two forms of cannabis – charas and ganja — or any drink prepared from it.
    • The WHO says that cannabis is by far the most widely cultivated, trafficked and abused illicit drug in the world. But the UN decision could influence the global use of medicinal marijuana,
    • India was part of the voting majority, along with the US and most European nations.
    • China, Pakistan and Russia were among those who voted against, and Ukraine abstained.

    Cannabis in India

    In India, cannabis, also known as bhang, ganja, charas or hashish, is typically eaten (bhang golis, thandai, pakoras, lassi, etc.) or smoked (chillum or cigarette).

    Under international law

    • The Vienna-based CND, founded in 1946, is the UN agency mandated to decide on the scope of control of substances by placing them in the schedules of global drug control conventions.
    • Cannabis has been on Schedule IV–the most dangerous category– of the 1961 Single Convention on Narcotic Drugs for as long as the international treaty has existed.

    Fuss over Cannabis

    • Cannabis has various mental and physical effects, which include euphoria, altered states of mind and sense of time, difficulty concentrating, impaired short-term memory and body movement, relaxation, and an increase in appetite.
    • But global attitudes towards cannabis have changed dramatically, with many jurisdictions permitting cannabis use for recreation, medication or both, despite it remaining on Schedule IV of the UN list.
    • Currently, over 50 countries allow medicinal cannabis programs, and its recreational use has been legalized in Canada, Uruguay and 15 US states.

    Impact of the decision

    • The reclassification of cannabis by the UN agency, although significant, would not immediately change its status worldwide as long as individual countries continue with existing regulations.
    • The decision would add momentum to efforts for decriminalizing cannabis in countries where its use is most restricted, while further legalizing the substance in others.
    • Scientific research into marijuana’s medicinal properties is also expected to grow.
    • Legalising and regulating cannabis will “undermine criminal markets” as well as its smuggling and cultivation.

    Risks of Legalizing Cannabis

    (1) Health risks continue to persist

    • There are many misconceptions about cannabis. First, it is not accurate that cannabis is harmless.
    • Its immediate effects include impairments in memory and in mental processes, including ones that are critical for driving.
    • Long-term use of cannabis may lead to the development of addiction of the substance, persistent cognitive deficits, and of mental health problems like schizophrenia, depression and anxiety.
    • Exposure to cannabis in adolescence can alter brain development.

    (2) A new ‘tobacco’ under casualization

    • A second myth is that if cannabis is legalized and regulated, its harms can be minimized.
    • With legalization comes commercialization. Cannabis is often incorrectly advertised as being “natural” and “healthier than alcohol and tobacco”.
    • Tobacco, too, was initially touted as a natural and harmless plant that had been “safely” used in religious ceremonies for centuries.

    Way ahead

    • It’s important to make a distinction between legalization, decriminalization and commercialization.
    • While legalization and decriminalization are mostly used in a legal context, commercialization relates to the business side of things.
    • For India to liberalise its policy on cannabis, it should ensure that there are enough protections for children, the young, and those with severe mental illnesses, who are most vulnerable to its effects.

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  • Capital Markets: Challenges and Developments

    What are Municipal Bonds?

    | Governance | Mains Paper 2: Governance, Transparency & Accountability, Citizens Charters

    Bonds issued by the Lucknow Municipal Corporation (LMC) got listed on the Bombay Stock Exchange. It’s the ninth city in the country to raise capital through municipal bonds.

    Find out the rest eight cities issuing Municipal Bonds in India. Do let us know in the comment box.

    What are Municipal Bonds?

    • A municipal bond or muni bond is a debt instrument issued by municipal corporations or associated bodies.
    • These local governmental bodies utilise the funds raised through these bonds to finance projects for socio-economic development through building bridges, schools, hospitals, providing proper amenities to households, et al.
    • Such bonds come with a maturity period of three years, whereby municipal corporations provide returns on these bonds either from property and professional tax collected or from revenues generated from specific projects or both.
    • The Securities and Exchange Board of India (SEBI) revised the guidelines related to the issuance of municipal bonds in 2015 in an attempt to enable ULBs or local government bodies to raise finances from such sources.
    • Following this measure, different cities have capitalized on the new guidelines to fund initiatives such as Atal Mission for Rejuvenation and Urbanisation Transformation (AMRUT) and Smart Cities Mission.

    Their types

    There are primarily two types of municipal bonds in India, categorised as per their usage. These are –

    (1) General Obligation Bonds

    • These are issued to raise finances for general projects such as improving the infrastructure of a region.
    • Repayment of the bond, along with interest, is processed through revenue generated from different projects and taxes.

    (2) Revenue Bonds

    • These are issued to raise finance for specific projects, such as the construction of a particular building.
    • Repayment of such bonds (principal and accrued interest) shall be paid through revenues explicitly generated from the declared projects.

    Advantages of such Bonds

    There are multiple advantages of investing in municipal bonds which include –

    (1)Transparency

    Municipal bonds that are issued to the public are rated by renowned agencies such as CRISIL, which allows investors transparency regarding the credibility of the investment option.

    (2)Tax benefits

    In India, municipal bonds are exempted from taxation if the investor conforms to certain stipulated rules. In addition to such conformation, interest rates generated on such investment tools are also exempt from taxation policy.

    (3) Minimal risk

    Municipal bonds are issued by municipal authorities, implying involvement of minimal risk with these securities.

    Their limitations

    The disadvantages of municipal bonds are enumerated below –

    (1) Long maturity period

    • Municipal bonds come with a lock-in period of three years, imposing a burden on the liquidity requirements of investors.

    (2) Low-interest rates

    • Even though interest rates on municipal bonds, in some cases, are higher than other debt instruments, these rates are considerably low when compared to returns from market-linked financial instruments such as equity shares.

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