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India puts on hold plan to join major global bond indexes until new govt comes to power

12 Mar 2014 Evaluate

In a decision that knocked the rupee, India has put on hold plans to join major emerging market bond indexes, which have had required removal of restrictions on capital inflows. Additionally, separate plan to explore joining Euroclear, the world's largest securities settlement system, has also been deferred until the next government comes to power after General elections-2014.

Earlier, Finance Minister P Chidambaram and Reserve Bank of India Governor Raghuram Rajan had initiated talks with index compilers, including JP Morgan with a view of attracting billions of investment dollars after the rupee tumbled to a record low last August. Further, according to Standard Chartered Bank estimates, the country could potentially attract $20 billion to $40 billion in additional inflows over a year as India hoped to join the government bond indices by December.

However, the plan reportedly has been dumped over differences of abolishing investment limits on FIIs (foreign institutional investors) in government bonds.

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