Government bonds to be included in JP Morgan index from Friday

The inclusion will bring in an additional $2 billion per month or at least $25 billion annually.
The headquarters of JP Morgan Chase.
The headquarters of JP Morgan Chase.File Photo

MUMBAI: The much-anticipated inclusion of government bonds or G-secs in JP Morgan’s emerging market bond index from Friday will bring down the borrowing cost for the government and also increase stable and long-term foreign fund inflows into the domestic market, which many analysts peg at least $25 billion per year.

The inclusion will be staggered over a 10-month period from June 28 to March 31, 2025, indicating a 1 percent increment on its index weighting, JP Morgan had said in September last.

According to government and analysts' estimates, the inclusion will bring in an additional $2 billion per month or at least $25 billion annually into the country, which will go a long way in bridging the current account gap. 

Following the inclusion the country’s weighting in the index is expected to reach the maximum threshold of 10 percent in the index.

The inclusion marks the conclusion of a decade-long effort to secure the inclusion and attract more foreign fund inflows and promises higher FPI participation and the resultant lower domestic borrowing costs as it will increase the demand for the country’s sovereign debt and reduce bond yields.

The efforts towards inclusion began way back in September 2013 under the then Reserve Bank governor Raghuram Rajan. In 2024, efforts to include the bonds culminated with economists projecting $25 billion in inflows over the next 10 months, with the inclusion happening in 10 monthly increments of 1 percentage point each, starting June 28.

The inflows will increase in a similar quantum when the Bloomberg bond index will also add these bonds from January 31, 2025 in a staggered manner. Bloomberg Index Services announced its intention to add Indian sovereign debt to its emerging market local currency government index from January 31, 2025, in March 2024.

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