India seeks inclusion in Bloomberg's global bond index
What's the story
India is set to reapply for inclusion in major global bond indices, including the Bloomberg Global Aggregate Index. The move comes after the government exempted foreign investors from capital gains and withholding taxes. The country has also expanded its long-dated securities pool. Officials would be talking to global index operators and may also reach out to the Bank for International Settlements (BIS) to attract more foreign investment into Indian government bonds.
BIS engagement
BIS's special tax-exempt status
The Reserve Bank of India (RBI) and finance ministry officials are likely to approach the BIS for discussions. The BIS has been given a special tax-exempt status in this latest revision. It invests heavily in government securities (G-secs) and is exempt from taxes everywhere. This development is expected to bring $7-11 billion into India, one official said to ET, further boosting the country's bond market appeal.
Investor confidence
Addressing concerns
The issues raised by bond operators earlier included tax benefits, market access, and settlement. However, these concerns have largely been addressed now. Parul Mittal Sinha of Standard Chartered Bank said they expect these tax exemptions to make investing in Indian government bonds attractive for many foreign investors. She also emphasized that this would significantly bolster India's case for inclusion in the Bloomberg Global Aggregate Index, especially if these bonds are made eligible for Euroclear settlement.
Index participation
India's inclusion in other indices
India has been part of the JP Morgan Global Bond Index-Emerging Markets since June 2024, Bloomberg's EM Local Currency Government Index since January 2025, and the FTSE Russell Emerging Market Index since last September. However, Bloomberg's Global Aggregate Bond Index, one of the most widely tracked indices globally, postponed India's inclusion in January. The decision was made due to concerns over operational and market infrastructure issues such as trading workflows and fund registration processes.
Economic impact
Potential benefits of index inclusion
Typically, index inclusion leads global funds tracking those benchmarks to allocate capital proportionately to the country's weight. This can potentially trigger additional annual foreign fund flows worth tens of billions of dollars into India, lower government borrowing costs, and deepen the bond market. Analysts also suggest that higher inflows could help reverse the rupee's decline against other currencies.