Indian bond included in JP Morgan's Emerging Index, Foreign investment can come up to this much rupees

JP Morgan Chase & Co has decided to include India's government bonds in the benchmark Emerging Market Index. After two years of keeping India on a watchlist, now the decision follows. The inclusion of Indian bonds in JP Morgan's Government Bond Index-Emerging Market had been said by JP Morgan itself back in September for June 28, 2024.

Now, the weightage of Indian bonds in GBI-EM would surge gradually to 10 percent within a period of 10 months, starting from June 28 to March 31, 2025. This announcement will likely bring investments of up to Rs 2.50 lakh crore into India's bond market. At current levels, 23 Indian government bonds worth $330 billion, or Rs 27.36 lakh crore, are eligible for inclusion in the index. The Government of India came up with the Fully Accessible Route in 2020 and introduced significant market changes to help foreign portfolio investment. Hence, JP Morgan will include Indian bonds in the index.

Analysts say this will change the base rate in the country, and interest should come down drastically. Now, since the Corona period, the fiscal deficit of India has increased due to the enhanced cost of borrowing. Now, it should decrease as a large part of the cost of borrowing will come from it. That is positive for companies like banks and NBFCs.
The bond market of India is the third-largest market in emerging markets. The market capitalization of it is more than $ 1.2 trillion. This is three times more than that in Indonesia. With Russia already out of this list and the crisis wrapping up in China, it becomes pretty tricky for the world's debt investors.

It will increase the country's foreign exchange reserves by including India. The rupee will also get stability, and interest rates will come down, reducing bond interest. Much like business people, the government also needs money. Sometimes, under such circumstances, the government issues bonds for a particular project. It takes this loan through bonds. The bonds issued by the government are known as government bonds. These give a little less interest, but the investors' money is safe in it. It is the 25th market to join this index since it was launched in June 2005. Since the announcement regarding its inclusion into this bond in September 2023, over $10 billion has been invested in Government of India bonds. Currently, foreign institutional investors hold 2.4 percent of government securities. This will likely increase to around 5 percent in the next 12-18 months.