Step 1: Oxidation of Iodide by \( KMnO_4 \)
In a neutral medium, potassium permanganate oxidizes iodide (\( I^- \)) to iodate (\( IO_3^- \)). The reaction is:
\[
2MnO_4^- + I^- + H_2O \rightarrow 2MnO_2 + IO_3^- + 2OH^-
\]
Step 2: Identifying the Oxidation Product
The product of oxidation is iodate (\( IO_3^- \)), making option (2) correct.