On Friday, India’s government bonds or securities will be added to the global bond index.
Commencing on June 28, JP Morgan will incorporate Indian government bonds into its Government Bond Index-Emerging Markets (GBI-EM). Indian government bonds are being included in this index for the first time ever.
Incorporating government securities into the global bond index will benefit the Indian economy.
The weight of Indian bonds in the JP Morgan Emerging Markets Bond Index will be 10%. From June 28, 2024, to March 31, 2025, the weight of India’s government bonds will be progressively increased in this index by 1% each throughout the course of the following ten months.
Since September 2023, when JP Morgan announced that Indian bonds would be added to GBI-EM, more than $10 billion has been invested in Indian bonds.
This move will speed up foreign investment in Indian bonds. The inflow of foreign investment will drive up demand for Indian government bonds. The size of the Indian bond market will rise as a result. Additionally, there will be a rise in efficiency and liquidity.
Till now, only banks, insurance companies, and mutual funds have been major investors in government bonds. Now, a large number of global investors will be able to invest in Indian bonds. This will reduce the bond yield and will also reduce the cost of borrowing for the government which is expected to reduce the fiscal deficit.
Due to the growth in demand from overseas investors, the rupee may continue to strengthen in the upcoming months.
