India Welcomes JPMorgan’s Inclusion to its Government Bond Index-Emerging Markets

India Welcomes JPMorgan’s Inclusion to its Government Bond Index-Emerging Markets

JPMorgan’s Decision: A Confidence Booster for Indian Economy

The Indian government has expressed its satisfaction over JPMorgan’s decision to include India in its Government Bond Index-Emerging Markets (GBI-EM) index. This move is projected to result in billions of dollars of inflows into the Indian economy. According to the Department of Economic Affairs, this inclusion signifies confidence in the Indian economy, its growth prospects, and its economic policies. This decision is believed to benefit long-term investors in Indian government bonds with significant returns, similar to those who have invested in India’s equity markets.

An Overview of the Inclusion Process

JPMorgan has identified 23 Indian Government Bonds (IGBs) with a combined notional value of $330 billion as eligible for inclusion. The inclusion process is set to begin on June 28, 2024, and will continue over a 10-month period. During this period, India’s index weighting will increase by 1% each month until it reaches the maximum 10%.

India’s Growing Appeal to International Investors

This decision by JPMorgan underscores India’s growing appeal to international investors. The country’s economic growth is outpacing its peers, its geopolitical influence is on the rise, and it is increasingly seen as an alternative to China by global companies, including Apple Inc. This milestone sets India apart from its emerging-market peers, including neighboring China, where economic difficulties and financial market struggles have become a source of frustration for global investors.

Potential Impact on The Indian Economy

The inclusion of India in JPMorgan’s GBI-EM index could potentially result in substantial passive inflows into India. In the medium term, it could help lower the country’s cost of funding, making it more attractive for investments. Furthermore, the inclusion of Indian bonds in JPMorgan’s index could encourage other investors and institutions to follow suit, leading to increased foreign investment in Indian bonds.

Market Reactions to The Announcement

In response to this announcement, the Indian rupee showed a 0.3% increase in offshore trade and local bond yields are expected to fall as investors rush to take advantage of this opportunity. According to market experts, inclusion of India into JPMorgan GBI-EM Global index could bring in over $26 billion of passive inflows into India.