Last week, JP Morgan announced that it has decided to include Indian government bonds in its emerging-market debt index, more formally referred to as the Government Bond Index-emerging markets (GBI-EM) Index. The same will mean real benefits for the Indian bond market and will indirectly boost the country's economic prospects. The index suite, as per a Mint report, is benchmarked by around $236 billion in international funds.
"India’s trillion-dollar sovereign bond market is gearing up for a rush of foreign money after JPMorgan said it will include the nation’s debt in its emerging market indexes," wrote Bloomberg in a report. The report estimates that the inclusion of India in the Index might result in inflows to the tune of USD 40 billion.
As per Capital Mind CEO Deepak Shenoy, by 2025, India should see holdings of USD 20 billion by international index funds. "This is Rs 1,60,000 Cr. That would roughly be 10% of the total issuance of the 21 bonds," he tweeted.
As per analysts, the inclusion of India will mean that many global investors will be more than keen to invest money in the indexes. India will be able to borrow at lower interest rates, they add. "This is just the beginning. Bond indexing with potential Fed rate cuts next year can solve our credit cost issues structurally. At some point, Sovereign Debt rating upgrades should play its role," commented Aditya Jakki, who follows global financial developments closely.
