UPSC Prelims 2000 Q22: Indian Economy – Financial Markets & Capital Markets
Gilt - edged market means
- (a) bullion market
- (b) market of Government securities
- (c) market of guns
- (d) market of pure metals
Answer: (b) market of Government securities
Explanation
Meaning of the gilt-edged market
| Market | What is traded |
|---|---|
| Gilt-edged market | Government securities — safest, backed by the state |
| Bullion market | Gold and silver |
| Commodity market | Metals, grains and other goods |
| Equity market | Company shares |
Gilt-edged securities are government securities, so called because British government certificates once had gilded (gold) edges.
They carry almost no risk of default, since the government backs them, and in India they are issued by the RBI on behalf of the Centre and the States.
The market where they are bought and sold is the gilt-edged market.
Answer: (b) market of Government securities.
Why each option is right or wrong
- (a) Incorrect. The bullion market deals in gold and silver.
- (b) CORRECT. The gilt-edged market is the market for government securities.
- (c) Incorrect. Guns have nothing to do with the term.
- (d) Incorrect. Gilt refers to the edges of old certificates, not to metal being traded.
Key point
Government securities: treasury bills (under one year) and dated securities (longer term); RBI Retail Direct lets individuals buy them.
Remember
Gilt-edged market = government securities market.
Common mistakes
- Taking gilt literally as gold and choosing the bullion market.
- Confusing government securities with corporate bonds.
- Forgetting that the RBI manages government borrowing.
Exam tip
Gilt = government = gold-standard safe.
Sources
- Reserve Bank of India — Government Securities Market in India: A Primer
- Ramesh Singh — Indian Economy, chapter 'Financial Market' (gilt-edged market)