UPSC Prelims 2022 · GS Paper 1 · Q95

Economy

Medium · Inflation-Indexed Bonds

Consider the following claimed advantages of Inflation-Indexed Bonds (IIBs) issued by the Government of India:

1. They allow the government to offer a lower coupon rate compared to conventional bonds.

2. They protect investors from the erosion of real returns caused by inflation.

3. Interest earned and capital gains on IIBs are fully exempt from income tax.

How many of the statements given above are correct?