UPSC Key: Government Bond Yield, Kishau Dam and Plurilateral Agreement - The Indian Express

Important topics and their relevance in UPSC CSE exam for September 16, 2026. If you missed the September 15, 2026 UPSC CSE exam key from the Indian Express, read it here

Merchants to pay 0.4% fee on UPI payments over Rs 2,000

• General Studies II: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

• General Studies III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

What’s the ongoing story: UPI TRANSACTIONS over Rs 2,000 will attract a fee of 0.4 per cent from October 15, and this will be paid by merchants, the National Payments Corporation of India (NPCI) said Tuesday. For instance, a merchant will pay Rs 40 when it receives Rs 10,000 via UPI.

• How Unified Payments Interface (UPI) works?

• ‘Unified Payments Interface (UPI) transactions are divided into Person-to-Person (P2P) and Person-to-Merchant (P2M) categories’—What is P2P and P2M?

• What is Merchant Discount Rate (MDR)?

• Who ultimately bears the cost of a digital payment transaction?

• Why was MDR removed from UPI transactions in 2020?

• Why has the government been subsidising low-value UPI transactions?

• How does MDR affect merchants, banks, payment service providers and fintech companies?

• Why are transactions above Rs 2,000 significant despite constituting only a small share of transaction volume?

• Can charging merchants improve the long-term sustainability of India’s digital-payment ecosystem?

• What challenges could emerge for small merchants if payment costs are passed on indirectly?

• An e-commerce website, grocery shop or a shopkeeper, receiving more than Rs 1 lakh per month from customers paying through UPI are categorised as merchants. The 0.4 per cent fee on P2M (person-to-merchant) transactions, which is called the Merchant Discount Rate (MDR), has been capped at Rs 300 per transaction. This means the MDR fee will not exceed Rs 300 for UPI payment of Rs 75,000 or more made to a merchant.

• In a separate statement, the Union Ministry of Finance said banks have been “advised” to ensure merchants do not pass on the cost to customers.

• These ‘industry’ payments account for 17 per cent of UPI P2M transactions in volume terms and 46 per cent in value terms. The charges announced on Tuesday will be reviewed every 6 months to 1 year and will be shared between banks, payment apps, and payment service providers.

• NPCI and the finance ministry said transactions of more than Rs 2,000, on which MDR would be charged to merchants, make up only 4 per cent of all UPI payments to merchants. The balance 96 per cent are UPI transactions less than Rs 2,000 each in ticket size. However, transactions of over Rs 2,000 make up two-thirds of all P2M payments in value terms.

• In 2025-26, there were more than 24,000 crore UPI transactions, and their total value was Rs 314 lakh crore. The RBI backed the introduction of MDR on large-value UPI transactions, saying it will help strengthen the long-term sustainability of India’s digital payments ecosystem. In a post on X, the central bank said it would enable UPI to continue scaling, innovating and serving consumers and businesses across the country.

• It said a fair distribution of MDR among ecosystem participants would support continued investment in technology, infrastructure and payment acceptance networks. Such investments, it said, could help expand UPI acceptance, deepen the customer base and sustain growth in transaction volumes.

• Merchant Discount Rate (alternatively referred to as the Transaction Discount Rate or TDR) is the sum total of all the charges and taxes that a digital payment entails. For instance, the MDR includes bank charges, which a bank charges customers and merchants for allowing payments to be made digitally. Similarly, MDR also includes the processing charges that a payments aggregator has to pay to online or mobile wallets or indeed to banks for their service.

• Since January 2020, there has been no MDR on RuPay debit cards and UPI transactions. This was to promote the adoption of digital payments across the country. To help meet some of the costs, the government has been subsidising payments of up to Rs 2,000 made to small merchants through its ‘Incentive scheme for promotion of RuPay Debit Cards and low-value BHIM-UPI transactions (P2M)’. The incentive offered is capped at 0.15 per cent of the transaction value. Large merchants are not covered under this scheme.

• The new fees apply only to person-to-merchant (P2M) transactions. Person-to-person (P2P) transactions will continue to be free, irrespective of the size of the transaction. There are no monthly quotas, volume limits, or tiered caps on free UPI transactions for individuals, the Ministry of Finance said in a statement, adding that daily transaction limits of Rs 1 lakh-Rs 5 lakh enforced by banks and NPCI are “purely risk-management measures, not commercial charge tiers”.

Previous year UPSC Prelims Question Covering similar theme: 1) Which one of the following best describes the term “Merchant Discount Rate” sometimes seen in news? (UPSC CSE, 2018) 1. The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank. 2. The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services. 3. The charge to a merchant by a bank for accepting payments from his customers through the bank’s debit cards. 4. The incentive given by the Government to merchants for promoting digital payments by their customers through Point of Sale (PoS) machines and debit cards.

2) Which one of the following statements about Unified Payments Interface (UPI) and Central Bank Digital Currency (Digital Rupee) is not correct ? (UPSC CSE, 2026) (a) UPI is a real-time payment system but Digital Rupee is akin to sovereign paper currency. (b) In case of UPI, settlement for end users happens instantly as the money gets immediately debited or credited but in case of Digital Rupee, there is no settlement as the wallet balance gets transferred to another wallet. (c) UPI transactions are recorded by banks and reflected in bank statements but in the case of Digital Rupee, no data is captured in bank statements as transactions are from one wallet to another. (d) In both the cases (UPI and Digital Rupee), the liability lies with the users and their respective banks.

Previous year UPSC main Question Covering similar theme: 📍How can the ‘Digital India’ programme help farmers to improve farm productivity and income? What steps has the Government taken in this regard? (UPSC, GS3, 2015)

• General Studies II: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

• General Studies III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

What’s the ongoing story: Red-flagging frauds under the Insolvency and Bankruptcy Code (IBC), the Enforcement Directorate (ED) has identified “re-examination of collusive resolution cases involving dis¬p¬r¬o¬p¬ortionately large haircuts through which promoters re-acquire assets” as a key thrust area.

• What you know about Zee Group founder Subhash Chandra case?

• What is the difference between insolvency and bankruptcy?

• What is a corporate insolvency resolution process (CIRP)?

• What is a haircut in insolvency proceedings?

• What are preferential, undervalued, fraudulent and extortionate transactions?

• Should the IBC prioritise resolution of distressed businesses or maximum recovery for creditors?

• How can valuation problems lead to excessive haircuts?

• This comes in the backdrop of the National Company Law Tribunal‘s (NCLT) August 25 order which allowed Essel Group founder Subhash Chandra to settle his personal insolvency proceedings by paying Rs 6.25 crore, against admitted claims of Rs 22,006.57 crore. On September 1, a five-member special bench of the NCLT stayed the settlement order.

• In a statement, the ED listed the identification of some “core operational thrust areas” at its 36th Quarterly Conference of Zonal Officers (QCZO), held at the Indian Institute of Management, Bengaluru, on September 14-15. “Unearthing frauds under the Insolvency and Bankruptcy Code and the PMLA (Prevention of Money Laundering Act)” headed the list.

• According to the agency, it “identified recurring malpractices including circumvention of Section 29A, inflation of related-party claims, manipulation of the Committee of Creditors, asset stripping and artificially large haircuts through which promoters regain control of assets”.

• Section 29A of the IBC prohibits defaulting promoters, wilful defaulters, and connected/ related parties from bidding for their own company during insolvency.

• According to the agency, illustrative cases were also discussed during the conference. Asked if Chandra’s case was discussed, an ED official said, “Many cases were discussed. I cannot specifically tell which ones.”

• The Subhash Chandra settlement highlights a larger concern over deep haircuts under the IBC, where creditors often recover only a fraction of what they are owed. Between FY2021-22 and FY2025-26, 1,077 cases were resolved under the IBC, with creditors recovering Rs 2.47 lakh crore — an average recovery of about 29% of admitted claims. In FY26, recovery fell to 20%, the lowest in five years, down from 37% in FY25, 28% in FY24, 39% in FY23 and 24% in FY22.

• A recent National Company Law Tribunal (NCLT) order involving Zee Group founder Subhash Chandra has yet again exposed one of the most highly debated issues under the Insolvency and Bankruptcy Code (IBC) framework — deep “haircuts”.

• The term “haircut” is not defined under the IBC. In banking parlance, however, it refers to the reduction in the value of an asset that has been used as collateral to protect a lender from potential losses.

• The August 25 NCLT order approved a repayment plan under which Chandra would pay just Rs 6.5 crore to creditors. While the admitted claims amount to Rs 22,006.57 crore, Chandra has said the total claim against him as a personal guarantor in the personal insolvency proceedings is only Rs 3,992 crore by the objectors of the plan.

• HDFC Bank, one of the lenders with 3.2% of the total claims, is now considering an appeal at the National Company Law Appellate Tribunal (NCLAT).

• The IBC, enacted in 2016, created a time-bound mechanism to deal with companies that fail to repay their loans — by either reviving such firms through a resolution process or liquidating them if resolution is not possible. Suppose a company fails to pay its debt. Its creditor then can approach the NCLT to initiate the “insolvency process”.

• Then, at least two valuers are appointed to assign a fair value and a liquidation value to the company, based on records and physical examination of its assets. Fair value is the total estimated value of assets under the current condition of the company. Liquidation value is the amount that creditors would get if the assets of the company are sold, mostly through auction. Enterprise value refers to what an entity would be worth if it continues operating.

• The IBC was enacted to provide a comprehensive system to rescue companies under financial stress or high debt through resolution and repayment to creditors. According to data available with the Ministry of Corporate Affairs, between the financial years (FY) 2021-22 and 2025-26, a total of 1,077 cases were resolved under the IBC, with creditors recovering Rs 2.47 lakh crore. The average recovery, however, was close to 29%. This means that a bank may have claims running into thousands of crore rupees, but what they receive could be just a small part of what it is owed.

📍Subhash Chandra’s Rs 6.5-crore settlement: What are ‘haircuts’ and how high can they get?

Previous year UPSC Prelims Question Covering similar theme: 3) Which of the following statements best describes the term ‘Scheme for Sustainable Structuring of Stressed Assets (S4A)’, recently seen in the news? (UPSC, CSE, 2017) (a) It is a procedure for considering ecological costs of developmental schemes formulated by the Government. (b) It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties. (c) It is a disinvestment plan of the Government regarding Central Public Sector Undertakings. (d) It is an important provision in The Insolvency and Bankruptcy Code’ recently implemented by the Government.

Preliminary Examination: Current events of national and international importance.

Main Examination: General Studies II: India and its neighbourhood- relations.

What’s the ongoing story: In a role reversal of sorts, India is exporting Hilsa fish to Bangladesh, bucking the trend of the neighbour supplying the sought-after variety of fish that has the highest place of pride on Bengal’s dining tables.

• Why is Hilsa geographically associated with the Ganga-Brahmaputra-Meghna river system?

• Why is Hilsa economically and culturally important in eastern India and Bangladesh?

• Why does Hilsa migrate between freshwater and marine environments?

• How can fisheries become a component of India-Bangladesh economic diplomacy?

• What are the areas of cooperation between India and Bangladesh?

• What are the issues and challenges between India and Bangladesh?

• How can India and Bangladesh strengthen their relations?

• What is the significance of Bangladesh for India?

• Around 500 tonnes of Hilsa, known as Ilish in Bengali, have been sent to Bangladesh in the past two months through the Petrapole land port on the international border in West Bengal. Traders expect an additional 150 to 200 tonnes of Hilsa to be exported to Bangladesh in the coming weeks.

• Traditionally, Hilsa is brought in from Bangladesh when its government allows its import, generally during the Durga Puja festive season. Currently, Bangladesh has paused Hilsa exports to India.

• According to fish traders and exporters, the development reflects changing patterns of production, availability and consumer demand in the two neighbouring countries. A substantial portion of the Hilsa consignment is from Gujarat, particularly the Bharuch region, and some supplies have moved through the Howrah fish market in Bengal.

• The traders said Hilsa with high roe content is attracting considerable demand in Chattogram, Sylhet and other districts of Bangladesh. Roe refers to the fully ripe egg mass in female hilsa fish, also used to prepare delicacies. The roe is also being processed for re-export from Bangladesh. Some fish are also being used to prepare dried and salted fish delicacies.

• For West Bengal, which has a strong cultural association with Hilsa and an established fish marketing network centred around Kolkata and Howrah, the development presents opportunities to strengthen production, aggregation, cold-chain logistics, value addition, processing, branding and export-oriented fisheries enterprises.

• Earlier, a team from the Fish Importers Association visited Dhaka in August and met Ataur Rehman Khan, the Commerce Secretary of Bangladesh, and urged him to lift the ban on the export of Hilsa to India.

• The hilsa is a fish of the wider Indian Ocean. Its range stretches from the Bay of Bengal to the coasts and estuaries of the Arabian Sea. Travel south and west from Bengal, and the ilish acquires other names and other cultural lives. On the Godavari it is the pulasa; on the Indus, the fish becomes palla. The fish moves between the sea and rivers, entering different river systems to spawn.

• Hilsa is an anadromous fish. It spends most of its life cycle in marine environments (the ocean/Bay of Bengal) but migrates upstream into freshwater rivers to spawn and breed.

• The shoals migrate upstream twice a year, primarily during the monsoon season (September–October) and again from mid-February to April.

• It is predominantly found in the Hooghly-Bhagirathi river system, the Padma, the Ganga, and the Indus river. It also occurs in western Indian waters, notably around the coast of Gujarat.

• Commissioned in 1975 on the Ganga river, the Farakka Barrage significantly disrupted Hilsa migration. Its navigation locks prevented the fish from moving westward into upstream regions like Prayagraj (Allahabad) and Patna, where they were once abundant.

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies II: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

What’s the ongoing story: C Raja Mohan Writes: After the BRICS summit in New Delhi, global geopolitical attention shifts to Washington, where Chinese leader Xi Jinping is headed next week. If “multipolarity” was the theme song in Delhi, “bipolarity” will be the signature tune in Washington.

• What is multipolarity and bipolarity?

• How is the contemporary global order different from the Cold War?

• Why has China’s economic clout within BRICS increased?

• How does India balance relations with the US, China and Russia?

• Can institutions such as BRICS, G20 and G7 independently shape the global order?

• What is the difference between institutional multilateralism and great-power diplomacy?

• What are the opportunities and challenges associated with promoting trade and cross-border payments in local currencies among BRICS countries?

• Do you think that BRICS is at a crossroads? (Hint: BRICS expanding membership and economic weight enhance its relevance, while its internal diversity constrains collective action)

• What are the implications of US-China competition for India’s foreign policy?

• The second meeting between presidents Donald Trump and Xi this year is part of an intensive series of exchanges. After Washington, Trump and Xi are likely to meet in Shenzhen, China, on the margins of the APEC summit. If the current buzz of a trilateral summit proves real, Russia’s Vladimir Putin could join Trump and Xi there. The focus would then turn from a G2 to a possible G3 world. Further opportunities for great-power diplomacy could present themselves in Miami, where Trump hosts the annual G20 summit in December.

• Many of these multilateral gatherings, such as BRICS, APEC, and G20, are routine annual affairs. Despite the political glamour attached to these events in Delhi, significant collective progress in these meetings is rare. But these forums are useful venues where critical bilateral meetings take place. The highlight of the Delhi BRICS summit, for example, was the attempted reset of India-China relations by Prime Minister Narendra Modi and President Xi.

• The BRICS grouping on September 12 adopted the New Delhi Declaration, laying out common positions on issues ranging from trade and terrorism to artificial intelligence and institutional reform. —Set against the backdrop of tariffs, trade tensions, and geopolitical fragmentation, the grouping expressed its opposition to unilateral trade restrictions amid efforts to ease cross-border payments and investments across BRICS countries. —The declaration also contained several India-specific outcomes, from harsher language on cross-border terrorism to new cooperation mechanisms spanning digital public infrastructure, health and finance. —Reaching consensus was itself significant. BRICS foreign ministers had failed to issue a joint statement in May amid differences between Iran and the UAE, and diplomats had spent the run-up to the summit trying to find language on the conflict that both countries could accept. —The final declaration reflects that balancing act, addressing the wars and tensions across West Asia without directly assigning responsibility to individual countries.

Previous year UPSC Prelims Question Covering similar theme: 4) Consider the following statements with regard to BRICS: (UPSC CSE, 2025) I. The 16th BRICS Summit was held under the Chairship of Russia in Kazan. II. Indonesia has become a full member of BRICS. III. The theme of the 16th BRICS Summit was Strengthening Multiculturalism for Just Global Development and Security. Which of the statements given above is/are correct? (a) I and II (b) II and III (c) I and III (d) I only Previous year UPSC Mains Question Covering similar theme: 📍Compare the significance of IBSA and BRICS in the context of India’s multilateral diplomacy. (UPSC, GS2, 2012) 📍“BRICS acts as a powerful counterweight in global governance, actively amplifying the voice and influence of the Global South.” Explain the role of BRICS in projecting itself as an alternative to other groupings (UPSC, GS2, 2026)

Preliminary Examination: Indian and World Geography-Physical, Social, Economic Geography of India and the World.

• General Studies I: Important Geophysical phenomena such as earthquakes, Tsunami, Volcanic activity, cyclone etc., geographical features and their location-changes in critical geographical features (including water-bodies and ice-caps) and in flora and fauna and the effects of such changes.

• General Studies III: Disaster and disaster management.

What’s the ongoing story: Srinivas Chokkakula Writes- Rivers are central to South Asia’s geographical imagination. They cannot just be seen as sources of water to be allocated, but they are also carriers of shared risks.

• What is a Glacial Lake Outburst Flood (GLOF)?

• How is a GLOF different from a conventional flood?

• What is the Himalayan cryosphere?

• What is the relationship between climate change and cryospheric hazards?

• How vulnerable are the Himalayas to glacial lake outburst flood?

• How can the risks from GLOFs be reduced?

• What challenges arise in sharing disaster-related data between countries?

• How can early-warning systems reduce disaster mortality?

• What is the role of regional cooperation in Himalayan disaster management?

• How can water treaties incorporate disaster-risk management?

• GLOF — Glacial Lake Outburst Flood — is now a more familiar term. The fury of the floods in Nepal, with its shocking social-media visuals of a sheet of water reportedly close to seven metres high and carrying a terrifying mass of debris, has made GLOF almost a viral hashtag.

• Emerging evidence suggests it is not technically a GLOF, but an avalanche that turned into a cascading debris-flow hazard. Yet instead of repeating the clichéd clarion calls about nature taking notice of the Anthropocene, we may be better off paying attention to something more elementary — geography.

• The spectacle calls for a kind of geographical revanchism, that is, a reassertion of South Asia as a geographical and ecological region, rather than merely a collection of disparate political territories. GLOFs know no borders. Our responses cannot be geography-blind.

• The manner in which the disaster unfolded should shake the territorial imaginations that we often hold onto when we engage with our neighbourhood. Rivers are central to South Asia’s geographical imagination. They cannot just be seen as sources of water to be allocated; they are also carriers of shared risks. The origins of the GLOF in northern Nepal meant that it bore much of the immediate brunt. But India has little reason to be complacent.

• India itself has experienced a series of similar incidents, with direct implications for its water-security interests. In 2014, a landslide over the same river, Bhote Koshi, led to the creation of a lake impounded by the landslide. India collaborated with Nepal to breach the lake in a controlled manner to reduce the downstream impact.

• In 2021, the Chamoli disaster, triggered by an avalanche and resulting in a massive flash flood, caused enormous losses, with impacts felt as far as Delhi – where its drinking water supplies were disrupted. In 2023, the South Lhonak GLOF in Sikkim again demonstrated the speed and scale with which Himalayan hazards can have cascading impacts across settlements and critical infrastructure.

• We tend to underestimate the costs of these incidents, and do not account for how they can set infrastructure, livelihoods and development trajectories back by several steps. For a country pursuing the scale of transformation envisaged under the Viksit Bharat vision, repeated disruptions to critical infrastructure and water systems cannot be peripheral concerns.

• India is not oblivious to these risks, though. The Parliamentary Standing Committee on Water Resources, in its 2023 report on glacier management in the Himalayas, prominently discussed flash floods associated with glacial melting and the risks of glacial lake outbursts. Taking note of these emerging risks, the Committee made several recommendations on glacier management, including the need for systematic data gathering and monitoring of glaciers in the Indian Himalayan Region to develop actionable plans.

• A glacial collapse is the detachment of a large mass of glacier ice from its bed – sometimes involving millions of cubic metres of ice, rock, and water – that can transform into a highly mobile ice-rich avalanche or debris flow. This collapse is not a formally defined scientific term in glaciology, but is widely used to describe the event.

• A flash flood is a sudden (and often violent) surge of water that inundates low-lying areas in very small periods of time. In mountainous terrains, such floods carry greater energy, obliterating all the structures in its path. The sheer velocity of the flood leaves communities that live downstream with little to no warning or window for evacuation.

Previous year UPSC Mains Question Covering similar theme: 📍What is the phenomenon of ‘Cloudbursts’? Explain. (UPSC, GS1, 2024) 📍How do the melting of the Arctic ice and glaciers of the Antarctic differently affect the weather patterns and human activities on the Earth? Explain. (UPSC GS1, 2021) 📍How will the melting of Himalayan glaciers have a far-reaching impact on the water resources of India? (UPSC GS1, 2020) 📍Bring out the relationship between the shrinking Himalayan glaciers and the symptoms of climate change in the Indian sub-continent. (UPSC GS1, 2014)

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies II: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

What’s the ongoing story: India has consistently opposed plurilateral trade agreements — that is, agreements negotiated and implemented by exclusive groups rather than by all World Trade Organisation (WTO) members.

• What is a plurilateral agreement?

• What is the difference between multilateral and plurilateral agreement?

• What is the Investment Facilitation for Development (IFD) Agreement?

• What is the WTO agreement in Marrakesh?

• What was the takeaway from the 14th ministerial conference of the World Trade Organization?

• Why many countries are alleging that the New Delhi was holding up the WTO reform process?

• What did the 1994 Marrakesh Agreement do?

• Why India is opposing the Investment Facilitation for Development (IFD) Agreement?

• Why India’s stand is against plurilateral pacts?

• Going by the 2026 BRICS Summit declaration, India appears to be warming up to the idea of such deals backed by major trading powers, including China. The New Delhi Declaration said BRICS members recognise the importance of identifying “pathways” for plurilateral initiatives in the WTO legal framework. This comes just months after India lodged its strong reservations against such pacts at the WTO’s 14th Ministerial Conference (MC14) in Cameroon.

• “We will ensure the implementation of the MC14 outcomes and continue to engage constructively towards the resolution of outstanding issues. We will engage constructively in the WTO reform to enhance the WTO’s authority, effectiveness, inclusiveness, and relevance, and build an open world economy. In this regard, we recognise that it is important to identify appropriate pathways for plurilateral initiatives into the WTO legal framework including on development-oriented issues, and to explore the formulation of forward-looking rules in the WTO,” the BRICS declaration said.

• Plurilateral agreements are increasingly being featured in various WTO reform-related proposals. At the Cameroon Ministerial Conference of the WTO held earlier this year in March, New Delhi had talked about developing guardrails on plurilateral agreements.

• A trade expert, who requested anonymity, said that it is significant that the term “guardrails” is missing from the declaration despite India being the BRICS chair.

• India has blocked the insertion of the China-backed Investment Facilitation for Development (IFD) plurilateral pact into the WTO rulebook. Under WTO rules, a plurilateral agreement can be included into the family of agreements “exclusively by consensus”.

• The IFD initiative, launched by the WTO in 2017, is aimed at enhancing foreign direct investment (FDI) flows. India said that IFD’s incorporation risks eroding the foundational principles and functional limits of the WTO. India indicated that as part of WTO reform discussions, members are seeking guardrails and legal safeguards for plurilaterals before integration of any specific plurilateral outcome.

📍India is opposing a China-led WTO investment deal, even at the risk of isolation. Here’s why

Previous year UPSC main Question Covering similar theme: 📍What are the challenges before the Indian economy when the world is moving away from free trade and multilateralism to protectionism and bilateralism? How can these challenges be met? (UPSC, GS3, 2025)

Mains Examination: General Studies III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

What’s the ongoing story: Over the past couple of months, there has been a growing worry about the rise in government bond yields across the world.

• What is the impact of higher yields on government bonds?

• What is the impact of lower yields on government bonds?

• What do you understand by Government Securities (G-Secs)?

• What are the types of Government Securities (G-Secs)?

• What are Treasury Bills (T-bills), Cash Management Bills (CMBs), Dated G-Secs, and State Development Loans (SDLs)?

• How Treasury Bills (T-bills), Cash Management Bills (CMBs), Dated G-Secs, and State Development Loans (SDLs) are different from each other?

• Why does a rise in US Treasury yields affect emerging economies?

• What is the relationship between US yields, exchange rates and emerging-market currencies?

• If the government in question is the United States government then the ramifications of higher yields on US government bonds are not limited to just the US economy; they start affecting all other economies and their constituents, even those in a land far far away from Washington DC.

• That’s because while a government is the safest entity to lend to in any economy, at a global level, there is a gradation for governments as well. Not all governments are equally credit-worthy. Imagine lending money to the Pakistan government for a period of 10 years in 1965! There are many instances of governments defaulting on their loans. There are also instances of governments ceasing to exist because the country itself stopped to exist or broke into two or more countries.

• In that sense, the US government is the safest borrower in the world. It has been considered so safe that parking your savings in lending to the US government has often been considered as safe as investing in gold. When the yields go up for US government bonds, lenders typically ask for higher interest rates from every government on the planet because the whole spectrum is riskier. And that is what is happening at present.

• Just as yields go down when bond prices rise, yields go up when bond prices fall, as is happening now. Bond prices fall when no one wants to hold them or buy new bonds because they are not sure if the government issuing the bond will be able to honour the promise. Given the scale of the market, even a single basis point increase in government bond yields — 100 basis points make a full percentage point — raises the interest payment (recall EMI) by billions of dollars for governments.

• A government bond is a document where a government acknowledges that it is taking a loan from someone and details how much it will pay back and by when. It borrows to meet the gap between what it spends (on everything from defence to subsidies) and what it earns (from levying taxes).

• The yield on a government bond refers to the interest rate that a government has to pay. Rising yield on bonds means that the government will have to shell out more money as interest payment; it is similar to your car or home loan EMI going up when the bank tells you that interest rates have been increased. In both cases, the borrower (the government or you) must keep aside more money next month to pay back the lender.

• Another direct fallout for higher interest payment is that the borrower will have less left for other activities (be it road construction or the government taking care of the poor or you having less money to buy books or traveling with your family).

• It also follows that up to a point, increases in interest rate, while uncomfortable because they make you pay more on the same loan, are manageable. But there is always a tipping point — if the rates continue to rise beyond it, neither the government nor you will be able to manage their respective budgets.

• There is an additional sting when interest rates go up for the government, as against when they go up for you alone: When they go up for the government, they go up for everyone (including you) in the economy.

• Government bonds — called by different names across countries, such as Treasuries in the US, Gilts in the UK, Bunds in Germany, and G-Secs in India — have a simple structure.

• A bond is essentially a formal I-O-U (or I owe you) between the government issuing the bond and the entity lending the money. The government states the money it is borrowing — say $100 — the period for which it is borrowing — say 10 years — and the additional money that the government will pay to the lender each year over and above the $100 at the end of the tenure.

Previous year UPSC Prelims Question Covering similar theme: 5) Consider the following markets: (UPSC CSE, 2023) 1. Government Bond Market 2. Call Money Market 3. Treasury Bill Market 4. Stock Market How many of the above are included in capital markets? (a) Only one (b) Only two (c) Only three (d) All four

6) Indian Government Bond Yields are influenced by which of the following? (UPSC CSE, 2021) 1. Actions of the United States Federal Reserve 2. Actions of the Reserve Bank of India 3. Inflation and short-term interest rates Select the correct answer using the code given below. (a) 1 and 2 only (b) 2 only (c) 3 only (d) 1, 2 and 3

Preliminary Examination: Indian Polity and Governance–Constitution, Political System, Panchayati Raj, Public Policy, Rights Issues, etc.

Mains Examination: General Studies II: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.

What’s the ongoing story: The chief ministers of six states on Tuesday (September 15) signed a memorandum of understanding (MoU) to pave the way for the long-pending 422 MW Kishau Multipurpose Project.

• What is the Kishau Multipurpose Project?

• Why was the signing of the MoU delayed?

• Why are inter-State river-water agreements difficult to implement?

• What is the difference between water allocation and water governance?

• How does the Kishau project illustrate the principle of cooperative federalism?

• What are the Inter-State water disputes in India?

• What are the Constitutional Provisions for interstate water disputes?

• What Article 262 of the Constitution says about interstate water disputes?

• What is the role of the Union Government under the Jal Shakti Ministry in mediating inter-state water conflicts?

• Himachal Pradesh Chief Minister Sukhvinder Singh Sukhu signed the MoU for the Rs 15,000-crore project with Uttarakhand CM Pushkar Singh Dhami, Uttar Pradesh CM Yogi Adityanath, Haryana CM Nayab Singh Saini, Rajasthan CM Bhajan Lal Sharma, and Delhi CM Rekha Gupta. Union Home Minister Amit Shah and Union Jal Shakti Minister CR Patil were present.

• The Kishau Dam was one of three storage projects planned in the upper reaches of the Yamuna and its tributaries following a MoU signed on May 12, 1994 by the Yamuna basin States — undivided Uttar Pradesh, Haryana, Rajasthan, Himachal Pradesh, and the National Capital Territory of Delhi — regarding the allocation of Yamuna water.

• The other two projects were Lakhwar and Renukaji, for which the MoUs have already been signed and are under implementation. These projects were required because there are no storage facilities constructed on the Upper Yamuna — from its source, Yamunotri glacier, in the lower Himalayas to the Okhla barrage in Delhi — a catchment area of about 30,000 square kilometres. As per the 1994 MoU, an interim seasonal allocation of the annual utilisable flow of river Yamuna was made among these five states.

• Of the total 11.983 billion cubic metres (BCM) of annual utilisable water of the Yamuna, a maximum allocation of 5.730 BCM was made to Haryana, followed by 4.032 BCM to Uttar Pradesh, 1.119 to Rajasthan, 0.724 BCM to Delhi and 0.378 BCM to Himachal Pradesh. When Uttarakhand was created in 2000, the 4.032 BCM share of water of undivided Uttar Pradesh was allocated to UP and Uttarakhand as 3.721 BCM and 0.311 BCM respectively. Earlier this year, a Detailed Project Report (DPR) of the Kishau project was circulated among the states concerned but it is yet to be finalised.

• The Kishau Multipurpose Project is a proposed dam and hydropower project on the Tons River, a major tributary of the Yamuna, along the border shared by Himachal Pradesh and Uttarakhand. The project envisages a 232.6-metre-high concrete gravity dam that will generate 1,476 million units of clean hydropower.

• The project site straddles Himachal Pradesh’s Sirmaur district and Uttarakhand’s Dehradun district. The two states signed an MoU to form a joint venture in June 2015, and Kishau Corporation Ltd was incorporated in January 2017. The project is intended to generate electricity, create irrigation potential of about 97,076 hectares, and provide drinking and industrial water to the beneficiary states, Haryana, Delhi, Rajasthan and Uttar Pradesh. The Chief Secretaries of Himachal and Uttarakhand hold the position of Kishau Corporation Ltd chairperson in two-year rotations.

Previous year UPSC main Question Covering similar theme: 📍Constitutional mechanisms to resolve the inter-state water disputes have failed to address and solve the problems. Is the failure due to structural or process inadequacy or both? Discuss. (UPSC, GS2, 2013)

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Priya Kumari Shukla is a Senior Copy Editor in the Indian Expre... Read More