Inclusion of Indian bonds in global indices delayed to 2023

India is postponing the inclusion of its government bonds in JP Morgan’s emerging market debt index to early 2023. The deferment of including Indian bonds in the global index has become necessary as the government still needs to fulfil several operational issues.

A hurdle for India’s inclusion in global bond indices has been the government’s unwillingness to waive capital gains taxes, a stumbling block during previous discussions. India is concerned that foreign inflows will increase the volatility of local markets.

The country’s inclusion in a global bond index has been discussed widely since 2019 when the Government of India approached JPMorgan and Bloomberg-Barclays to list its sovereign debt on global indices and initiated discussions with Euroclear for clearing and settlement.

Earlier this month, Goldman Sachs and Morgan Stanley had forecast that Indian bond index inclusion may take place in the second or third quarter of 2022. According to Goldman Sachs, Indian bonds may well be included in the index with a 10% weightage, the highest for any country in the index. As a result, the move could have potential inflows of $30 bn.

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