India's central bank, the Reserve Bank of India (RBI) has indicated that it will announce an issue of inflation-indexed bonds (IIBs) for launch on 4 June.

The government and the central bank have been concerned over rising gold imports into the country. Experts said that it is now known if the inflation-indexed bonds will be a substitute for gold or if it will simply complement investments in gold. They said that the IIBs will become an attractive investment option the yield offered will be determined by the market forces as the the investors will launch bids for the instrument.

IIBs are indexed to the Wholesale Price Index (WPI) but many believe that the Consumer Price Index (CPI) would have been a better index for the instrument. The next will see the launch of the first IIBs and the government might come with such issues later in the future. The IIB, which will be focused on institutional investors, will be listed on the markets. The government has made reservation of 20 per cent of the Rs. 1,000-2,000 crore issue for retail investors. IIBs will pay the indexed value or the original principal to the investors.