Indian Government Bonds to Join JP Morgan Emerging Market Index
Starting June 28, 2024, Indian Government Bonds will be included in the JP Morgan Government Bond Index for Emerging Markets (GBI-EM). This inclusion will take place over a period of 10 months, ending on March 31, 2025. Initially, India will have a 1% weightage in the index, which will gradually rise to 10% at a rate of about 1% per month.
The inclusion is expected to bring USD 20-25 billion of inflows into the Indian bond market. Notably, India’s index-eligible bonds have already attracted USD 10 billion since the announcement in September last year.
On September 21, 2023, JPMorgan announced that only Indian government bonds issued by the Reserve Bank of India (RBI) under the Fully Accessible Route (FAR) will be included. All FAR-designated Indian Government Bonds (IGBs) maturing after December 31, 2026, will be eligible.
RBI Governor Shaktikanta Das stated in a press conference on June 7 that the central bank is not worried about the large foreign fund inflows from this inclusion. He assured that the RBI has the tools to manage these flows effectively.
Experts believe that this inclusion will boost demand for Indian government securities. Vishal Gupta, Co-founder of IndiaBonds.com, called it a watershed moment for India’s fixed-income markets. He noted that this move puts Indian bond markets on the radar of global investors and could lead to further growth in the coming years.
Gupta also mentioned that global investors are looking to allocate capital to emerging markets, making the timing of this inclusion almost perfect. He expects that investments will start with government bonds and eventually extend to bonds with lower credit ratings.
