Bloomberg Index Services (BISL) has once again deferred a decision on including Indian government bonds in its flagship Global Aggregate Index, saying recent market reforms need more time to become firmly embedded in day-to-day market practices.
The move comes as a setback for the government, which last month scrapped the 12.5% long-term capital gains tax on bonds and the 20% withholding tax on interest earned from government securities in a bid to accelerate inclusion in the Bloomberg index.
After Indian government bonds were included in JP Morgan's emerging market bond index on June 28, 2024, Bloomberg had initially proposed adding them to its index from end-January 2026. However, it had deferred the move earlier as well, citing operational and infrastructure-related issues. The latest Union Budget, presented on February 1, subsequently announced significant tax reforms for bonds.
In a statement issued on Friday, Bloomberg said any decision on including Indian government bonds in the Bloomberg Global Aggregate Index must be supported by demonstrated operational efficiency for investors tracking and benchmarking against the index, alongside regulatory and market structure reforms.
“Feedback received during our continued engagement indicates that many market participants would like to see these enhancements become more firmly established in day-to-day market practice before a decision is made on index inclusion,” Bloomberg Index Services said.
According to Bloomberg, investors continue to seek wider implementation of automated trading capabilities across major regions. The index provider also wants further evidence that recent reforms have translated into smoother operational processes, including account opening and onboarding for foreign investors.
It added that it would continue engaging with investors, market participants, custodians, trading venues, regulators and other stakeholders as part of its governance process and would provide an update as the review progresses.
BISL has been reviewing the inclusion of Indian government securities in its flagship index, which is tracked by nearly $3 trillion in passive assets globally. It had postponed a decision in January this year amid concerns over settlement processes, post-trade taxation and broader market infrastructure.
Whenever it materialises, inclusion in the index is expected to bring billions of dollars in foreign inflows into the country. Analysts estimate that inclusion in the Bloomberg Global Aggregate Index could attract $5-10 billion of inflows into India's bond market.
