Indian bonds are set to be added to global indexes. Here’s why it could be a gamechanger

The decision to include Indian government bonds in two prominent global indexes recently is being viewed as a shot in the arm for the rapidly growing country and is expected to bring in billions of inflows.

India’s bonds will be added to the JPMorgan Government Bond Index-Emerging Markets (GBI-EM) in June, the Wall Street lender announced in September.

The JPMorgan inclusion is reportedly India’s first ever inclusion in a global bond index.

Earlier this month, Bloomberg Index Services’ followed suit, announcing it will be adding Indian government bonds to its Emerging Market Local Currency Government Index from Jan. 31, 2025.

Such inclusions, analysts noted, could lead to billions of dollars worth of inflows into India’s rupee-denominated government debt. As demand rises, bond yields fall, supporting the local currency.

Deepak Agrawal, chief investment officer of debt at Kotak Mutual Fund, told CNBC he expects the inclusions to generate “stable flows of around $25 [billion] to $30 billion” over the next 12 to 18 months following the rebalancing period starting in June 2024.

“Overall we see this as a move in the right direction,” Agrawal added.

Goldman Sachs said it expects India’s bond markets to see inflows “upwards of $40 billion from the time of announcement to the end of the scale-in period, or around $2 billion per month.”

JPMorgan has said the inclusion of Indian bonds will be staggered over 10 months, starting from a 1% in June to a maximum 10% weightage in its index in April next year.

JPMorgan’s inclusion of Indian bonds has been hailed as a “milestone event” by Invest India, the government’s national investment promotion agency.

“The inclusion will help India realize the goal of a $5 trillion economy by 2030,” the agency said, adding it will help Asia’s third largest economy integrate with the global economy.

It will also help India…