In a significant development that could pull in foreign funds into India’s debt market, the global financial firm - J P Morgan has said that it is all set to include Indian government bonds into its benchmark Emerging Market index from next year. This move is likely to bring down borrowing cost for the government. The inclusion of the Indian government bonds (IGBs) or government securities (G-Secs) will be staggered over a 10-month period from June 28, 2024 to March 31, 2025, indicating one per cent increment on its index weight.
J P Morgan said India's weight is expected to reach the maximum weight threshold of 10 per cent in the GBI-EM Global Diversified, and around 8.7 per cent in the GBI-EM Global index. This would help attract higher foreign flows, as many overseas funds are mandated to track global indices. It will also help bring in large passive investments from overseas, as a result of which more domestic capital would be available for industry, as crowding out would be reduced.
The inclusion of Indian government bonds in the JPMorgan Government Bond Index-Emerging Markets index could be seen as yet another sign of its growing appeal to global investors as it continues to remain one of the fastest-growing major economies. This development holds significance particularly as various global manufacturing behemoths are looking at India to set up shop as part of their China+1 diversification strategy in a post-pandemic world order.
