India One Step Closer to Inclusion in Global Bond Indexes

India is poised for inclusion in global bond indexes, with JPMorgan considering sovereign bonds.

FREMONT, CA: With investment hurdles concerning India solved, JPMorgan Chase & Co. will likely include the country’s sovereign bonds on its indexes. It can be witnessed that India has a keen interest in this inclusion. Hence, the commencement of the inclusion is expected around the middle of 2024, followed by a gradual phase-in process.

India had approached the threshold of granting broader access to its one trillion USD government debt market to global funds, however, it faced a retraction due to unmet prerequisites for index inclusion. It has become the world’s last big emerging market without joining forces with other nations on the international gauges. Policymakers in the country are highly concerned about the hot money inflows.

Morgan Stanley's assessment suggests the probability of India being incorporated into two of the three worldwide bond indexes, where one among them is the JPMorgan emerging market index, leading to an influx of 40 billion USD in capital. JPMorgan will be releasing the results of its index reviews in October. Index reviews from the previous year highlighted issues that ought to be solved, like a lengthy registration process and operational readiness required for trading, settlement, and custody of assets onshore.

Strategists from the Bank of America ensured that the providers would continue with the inclusion, unmindful of operational difficulties to diversify index constituents.

Resurfacing India’s index inclusion is supporting foreign investors to bring about 3.8 billion USD of index-eligible bonds or the Fully Accessible Route (FAR) notes, doubling the inflow from the last year. The yields on 10-year government bonds have experienced a decline of 12 basis points in 2023, on the other hand, reaching a level of 7.20 percent.

Greater the inflow, the lesser the borrowing costs, helping India with its infrastructure spending plans to power economic growth.