This refers to the editorial “Interest in inflation” (Business Line, May 17). The introduction of inflation indexed bonds in the financial market with a view to preventing people from buying gold is an important intervention to contain the current account deficit.
But it is not a kind of investment avenue that is up for grabs by the people, as it (bond) is indexed with the wholesale price index-based (WPI) inflation.
It is the consumer price index (CPI) that is of greater relevance to the people. It is worth mentioning that gold has become an integral part of the life of an ordinary Indian.
People prefer to buy gold in ornamental forms mainly to disclose their status. In this context, inflation indexed golds will not replace gold. Importantly, the bonds will have to compete with the gold market and the banking sector. Nevertheless, market watchers are curiously awaiting the launch of the bonds.
