NEW DELHI: The government is keen on Indian bonds joining the global indices but it will not make any changes in tax laws to get bonds listed overseas, a top finance ministry official told TNIE. The reaction comes after Morgan Stanley said it sees a good chance for JP Morgan to include Indian government bonds in its index.
Apparently, some indices had sought exemption from capital gains tax as a condition for listing the Government of India bonds.
“The effort to list Indian bonds in international markets is on. We are happy with the inclusion of Indian bonds in the global indices, provided no change in taxation law is demanded,” a top Finance Ministry said.
The official clarified that the timing of the listing completely depends upon overseas index operators (JP Morgan and Euroclear) agreeing to the centre’s terms and conditions on taxation issues. The official said that JP Morgan has not demanded any change in tax requirement, so it is likely that it will include Indian bonds anytime soon. Morgan Stanley sees a good chance of JP Morgan announcing the inclusion of G-secs on its global index.
“We see a good chance that JPM will announce the inclusion in September, surprising the market. This would trigger USD 30 billion of inflows in 2023-24. We recommend long INR and 10-year G-secs tactically,” said Morgan Stanley in a report.
“Our understanding is that the JPM index team has been collecting feedback from global markets in the past two months. There are two key takeaways 1) The index team now has more incentive to include India on the back of Russia’s exclusion and 2) Most GBI-EM investors either support or don’t object to the inclusion,” it added.
Meanwhile, Morgan Stanley also stated that for India achieving Euroclear is easier than the market assumption and the authority’s perception. It said that what Euroclear wants is a clarification of what capital gains tax rate to pay and how to pay it.
“Hence, what is possible is that after the index inclusion announcement, both the finance ministry and the RBI will work together with Euroclear to address the outstanding issue and India could still achieve Euroclear before the actual index inclusion,” Morgan Stanley added.