Bloomberg Index Services advisory committee has suggested adding Indian government bonds to the Emerging Market Local Currency Index. A formal announcement is expected soon, according to an Economics Times report.
If approved, the inclusion may attract $5 billion from both passive and active investors by September or October, the report added.
Moneycontrol could not independently verify the development.
Last month, the index operator announced a consultation for feedback on adding Indian government bonds to the Bloomberg Emerging Market Local Currency Index. They proposed a phased inclusion starting in September and requested suggestions by January 25.
The proposal outlines a five-month phased inclusion of Indian government bonds starting September 2024. Each month, 20 percent of the full-market value of bonds in the Fully Accessible Route (FAR) category will be added, completing the process by January 2025. The FAR category comprises bonds accessible to foreign investors without limits or restrictions, it said.
In September 2023, JPMorgan announced the inclusion of Indian government bonds in its Government Bond Index-Emerging Markets (GBI-EM) global index suite starting from June 2024. Like the Bloomberg proposal, the inclusion will take place over several months.
Inclusion of the Indian government bonds in global indices is anticipated to attract billions in foreign investment to the domestic sovereign debt market. Economists estimate that the addition to JP Morgan indices alone could bring in $24 billion.
India welcomes inclusion in global bond indices, yet concerns arise about potential impact on domestic markets. Chief Economic Adviser V Anantha Nageswaran highlighted in September 2023 the challenge to maintain the rupee competitiveness amid heavy foreign inflows.
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