India debuts in the JP Morgan Bond Index. What does this landmark event mean for the economy?
India debuts in the JP Morgan Bond Index. What does this landmark event mean for the economy?
Published: 28th June 2024
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India on the global map
In a significant milestone, Indian government bonds are now a part of the JP Morgan Emerging Markets Index. They debuted in the index starting June 28, 2024.
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Why is it monumental
The inclusion is significant as it makes India a top destination for global investors, especially as China’s economy struggles and other emerging markets face instability.
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How does India benefit?
We are set to attract billions of dollars in inflows. In Sept 2023, Goldman Sachs pegged $40 billion investments as a result of the inclusion. And $10 billion has already flown in!
Funding the domestic growth
This influx of global capital will reduce India's dependence on domestic investors, allowing local banks to deploy more capital and lower the cost of capital.
What’s more
Banks will benefit from enhanced liquidity, enabling them to sell government bond holdings and free up capital. This can also boost private credit and corporate bond markets.
Why are global investors keen on Indian bonds?
India makes a compelling investment for global bond investors, given our high-growth, high-yield market. At over 8% GDP growth, India is the world’s fastest-growing large economy.
Risks that come with the inclusion
Volatility during a global turmoil can lead to sudden outflows, disrupting the markets. But the RBI has been building forex reserves to counter this. The coffer will act as asafety net.