The proposed inclusion of Indian Government Securities (G-Secs) in the Bloomberg Emerging Market (EM) Local Currency Government Index and related indices could attract foreign portfolio investments of about $3-4 billion in these securities, per expert estimates.

The inclusion will be phased over ten months, starting January 31, 2025.

IFA Global Research, in a report, said: “After Indian bonds got included in JP Morgan EM bond index, Bloomberg announced inclusion of Indian bonds in its Emerging market local currency government index with effect from January 31, 2025. This is likely to result in inflows of around USD 3 billion into domestic debt.”

Venkatakrishnan Srinivasan, Founder and Managing Partner of Rockfort Fincap LLP, said due to this inclusion a maximum of $4 billion inflows can be expected. This is not much, he added.

More inflows will come into the debt market due to inclusion of G-Secs by JPMorgan in its Government Bond Index-Emerging Markets (GBI-EM) from June 2024. The market expectation is that $24 billion will be invested in G-Secs over 10 months beginning June 2024.

The inclusion of Indian government securities in the JP Morgan Global Bond Index - Emerging Markets from June 2024 could augur well for the outlook for capital flows to India, per RBI’s latest financial stability report.

“India’s inclusion in the JP Morgan Global Bond Index - Emerging Markets is expected to increase bond market liquidity, widen the investor base and improve price discovery.

“Bond index inclusion typically results in benchmark-driven investments, providing access to a larger and more diverse pool of external investments and paving the way for increased flow of foreign investments into government securities under the fully accessible route (FAR),” the report said.

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