GyanGramWith reference to the Indian economy, what are the advantages of "Inflation-Indexed Bonds (IIBs)"? 1. Governm…
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With reference to the Indian economy, what are the advantages of "Inflation-Indexed Bonds (IIBs)"?
1. Government can reduce the coupon rates on its borrowing by way of IIBs.
2. IIBs provide protection to the investors from uncertainty regarding inflation.
3. The interest received as well as capital gains on IIBs are not taxable.
Which of the statements given above are correct ?
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• Correct Answer: A
• IIBs let government offer lower coupon rates since investors are protected against inflation erosion.
• Principal and interest adjust to CPI, removing inflation uncertainty.
• Interest and capital gains on IIBs are taxable, not exempt.
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