Know how JPMorgan's inclusion of India in its emerging market debt index is set to bring billions of dollars into India's economy, impacting bond yields and the rupee. Learn about the gradual inclusion process and its potential benefits for India's financial landscape.


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JPMorgan, a leading financial institution, is adding India to its influential emerging market debt index, paving the way for a significant influx of capital into the world's fifth-largest economy. This development is expected to help India address its current account and fiscal deficits.

According to JPMorgan's announcement on Friday, India's local bonds will be incorporated into the Government Bond Index-Emerging Markets (GBI-EM) index, which serves as a benchmark for approximately $236 billion in global funds. This inclusion involves 23 Indian Government Bonds (IGBs) with a combined notional value of $330 billion, all falling under the category of "fully accessible" for non-residents.

JPMorgan noted that India's weight in the GBI-EM Global Diversified and GBI-EM Global Index is expected to reach 10% and approximately 8.7%, respectively.

As a direct impact of this news, India's benchmark 10-year bond yield experienced a drop of 7 basis points, falling to 7.0788%, the lowest since July 27. Simultaneously, the Indian rupee strengthened by 0.3%, reaching 82.25 per dollar in early trading.

The inclusion process will commence on June 28, 2024, spanning 10 months with 1% increments in its index weighting. This gradual approach is designed to help India reach the maximum weighting of 10%, as specified by JPMorgan.

Sanjeev Sanyal, a member of India's Economic Advisory Council to the Prime Minister, highlighted the significance of this development, stating that it will provide a substantial additional source of passive foreign funding for India, ultimately reducing the country's cost of funding in the medium term.

India initiated discussions on including its debt in global indexes back in 2019 and took steps such as removing foreign investment restrictions on some government securities in 2020. These measures aimed to facilitate entry into global bond indexes. However, issues related to capital gains taxes and local settlement had delayed the country's inclusion.

Analysts anticipate that this announcement will generate immediate positive effects on the Indian bond market, as investors seek to capitalize on the forthcoming inclusion. Foreign investor interest in Indian bonds had been modest, with net purchases of $3.4 billion in 2023. Foreign investors currently hold less than 2% of India's outstanding government debt.

Additionally, JPMorgan revealed that Egypt's eligibility in the GBI-EM series would undergo a review lasting three to six months. This review is prompted by reports of significant challenges related to currency repatriation. Should these hurdles persist, a status review for Egypt's removal from the GBI-EM series will be initiated, although Egypt will remain in the index during this evaluation period.

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