Indian government bonds may be added to a global index next year, triggering passive inflows of about $30 billion to help the country finance its current account and fiscal deficits, according to Goldman Sachs Group Inc.
According to experts Danny Suwanapruti and Santanu Sengupta, the country’s sovereign bonds may be included in JPMorgan’s GBI-EM Global Diversified bond index with an initial 10% weighting. One of the largest emerging markets without a worldwide index is India, which has a $1 trillion market for sovereign bonds.
Goldman’s optimism comes despite the fact that the index inclusion has largely been put on hold after New Delhi refrained from implementing any tax adjustments for foreigners that would have aided the settlement of Indian bonds on global clearing platforms like Euroclear. Although not Euroclearable, Chinese and Indonesian government bonds are included in the JPMorgan index, according to the experts.
The researchers stated that including India, a sizable, deep, and high-yielding market, will assist to diversify the index and raise its average yield. A move like that would be advantageous to many parties, including EM investors and the Indian government.
According to the memo, account opening procedures for foreigners are currently onerous in India but might be improved with a longer lead time for inclusion. According to the analysts, the nation has also made some strides on operational difficulties including posting margin requirements and longer settlement timings.