RBI says India’s inclusion in global bond index may happen in next few months

RBI says India’s inclusion in global bond index may happen in next few months

MUMBAI: Reserve Bank of India Governor Shaktikanta Das on Friday said it is in an advanced stage of discussion regarding the country’s inclusion in the global bond index, and the same may happen in the coming months.

“Tough to give a timeline, but global bond index inclusion should happen in the next few months,” Das told a post-policy press conference.

India has been pitching for the inclusion of the country’s government bonds into global bond indices, which are tracked by global passive fixed income funds. In the Union Budget, the government had allowed foreign portfolio investments in certain government securities.

In September, brokerage firm Morgan Stanley said India’s inclusion in the global bond indices will attract foreign flows worth $170 billion to $250 billion over the next decade.

“This would push foreign ownership of IGBs to 9% by 2031…In a bull case, foreigners could buy US$27 billion a year thanks to well-controlled inflation, a well-managed fiscal deficit and gradual INR appreciation,” Morgan Stanley Research said.

Morgan Stanley Research is of the view that the process for listing of Indian bonds in the Belgium-based clearing house Euroclear is expected to be completed by the end of 2021 and that consequently the GBI-EM and Global Aggregate Index would include Indian bonds in their index.

The government has for years been striving to have sovereign bonds listed on global indices, but so far the plan has suffered teething problems, the latest being the onset of the Covid-19 pandemic.

In the Union Budget for 2014-15, the then Finance Minister Arun Jaitley had mooted the international settlement of Indian debt.

Subsequently, the Finance Ministry in 2018 had even considered the issuance of an offshore sovereign bond for the first time ever. However, the plan was relegated to the backburner after several prominent economists, including former RBI Governor Raghuram Rajan, flagged risks to the idea.

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