Inflation indexed bonds or Inflation Indexed National Savings Securities :

India recently launched a new kind of bond to give individual investors some protection against inflation. The new bonds, officially called the Inflation Indexed National Savings Securities.

Unlike a traditional bond where the interest rate is fixed, in the inflation-linked bonds, the government will pay an interest of 1.5% per year above the rate of inflation as measured by the Consumer Price Index.

The interest rate will be reset every six months, to reflect any changes in inflation.

These bonds aren’t a great deal for investors who are in higher income-tax brackets, because the interest on the bonds is taxable as income. After taxes, the returns on these bonds will be lower than inflation.