Note: After the product was launched, I put in a more detailed analysis here.
After launching Wholesale Price Inflation Indexed Bonds in Jun 2013, RBI with the Government will now issue Consumer Price Inflation Indexed Bonds. Note that CPI inflation has been running way above WPI and therefore such bonds might actually benefit end-users.
But obviously the devil is in the details.
If this is a TL;DR for you, here’s the low-down:
- Return: Consumer Price Inflation + 1.5% per year, compounded half yearly and paid after 10 years. Pretty good [10 points]
- Risks: Low in general, but there is some interest rate risk if bank rates go above CPI+1.5%. [8 points]
- Liquidity: Low. Can’t sell the bonds. High prepayment penalty. 
- Taxes: Not tax efficient. Pay every year on interest deemed to be received. No TDS (maybe). 
- When? Last half of Dec 2013. Exact Dates later.
- Where to buy? Bank branches, Stock Holding Corporation of India Ltd.
- Online? May happen if RBI, banks or agencies decide to let you.
- How much: 5,000 per bond. Rs. 500,000 max. Only individuals and trusts. No corporates or banks or such.
- My view: Good product, but low liquidity. Useful for low income individuals (taxes <30% bracket).
I’ve deleted the rest of this analysis which was based on what was known before the product was launched.
Read this post for more details.