Inflation Indexed Bond

An inflation-indexed bond is a fixed-income instrument where both the principal and interest payments are adjusted periodically based on an inflation index—typically the Consumer Price Index (CPI)—protecting the investor's real purchasing power from erosion. As inflation rises, the bond's adjusted principal increases, which in turn raises the coupon payment calculated on it. In India, the RBI has issued Inflation Indexed National Savings Securities (IINSS) and Capital Indexed Bonds in the past, though market depth remains limited. Treasury Inflation-Protected Securities (TIPS) in the US are the globally recognised benchmark for this instrument class and are increasingly referenced by Indian investors with international portfolios.