Relevance of inflation-protected securities in India

Abstract

The study on the inflation protection securities primarily examines relevance of the inflation protected products in context of Indian financial markets. The study covers various aspects of inflation. It looks into the economic significance, calculation methodologies, pros and cons of inflation in an economy. Then the study goes on to examine various inflation linked products such as the inflation bonds and inflation swaps. The growth of these products across various markets such as US, UK and Brazil are considered to study the evolution of these products in these markets. These markets cover both the developed and developing markets across the globe. The next part of the study examines the growth of the inflation bond market in India. Various issuances of these bonds that have happened historically over the years in India are covered to understand the levels of acceptance of these products in the Indian context. Various factors which have hampered the growth of the financial products in India are considered. Thereafter the study looks at the current and future scenarios of the inflation, debt mutual funds and inflation linked bonds in India. The conclusion looks at the possibilities of improving the demand for inflation related products in India. It also examines the relevance of these products in the current Indian context and with varying levels of inflation.