On Friday (September 22), American bank JPMorgan announced that it would include India in its Government Bond Index-Emerging Markets (GBI-EM) index.
As per reports, 23 Indian Government Bonds (IGBs), which have a combined value of $330 billion, are eligible to be included in the emerging market debt index.
The country’s local bonds will be included in JP Morgan’s GBI-EM index for a period of 10 months, starting June 28, 2024, with 1% increments on index weighting (up to a maximum weighting of 10%).
JP Morgan to include India in the global bond index…. to reach max weight of 10% pic.twitter.com/AtGnYb57d9
— Sanjeev Sanyal (@sanjeevsanyal) September 22, 2023
“India’s weight is expected to reach the maximum weight threshold of 10% in the GBI-EM Global Diversified, and approximately 8.7% in the GBI-EM Global index,” JPMorgan said in a statement.
The move will pump billions of dollars into the Indian economy. Reportedly, the Indian government began the discussion on including its debt in global indexes way back in 2019. It had also been in talks with Belgium-based financial services company, Euroclear, for clearing and settlement.
Modi govt removed foreign investment restrictions on IGBs
The Indian government also removed restrictions on foreign investments in government securities in 2020 to be able to enter global bond indexes. As such, several Indian Government Bonds (IGBs) are now ‘Fully Accessible’ and have no foreign investment restrictions.
In a statement, JP Moargan’s Global Head of Index Research Gloria Kim said, “The Indian government’s introduction of the FAR (Fully Accessible Route) program in 2020 and substantive market reforms for aiding foreign portfolio investments”
Reportedly, foreign investment in Indian bonds has so far been $ 3.4 billion in 2023. At the same, it must be mentioned that foreign investors own less than 2% (~$12 billion) of Indian govt debt.
Following the announcement of JP Morgan, it is now expected that India will be included in the global bond index of other banks as well.
Indian Economy to grow at 8.3% in the first quarter and 6.7% in FY24: SBI Research
The Indian economy is expected to have grown at 8.3% during the first quarter of the current Financial Year 2024 (Q1 of FY24), i.e. between April-June, as per the latest report by SBI’s Economic Research Department (SBI Ecowrap). SBI’s Chief Economic Advisor, Soumya Kanti Ghosh had authored this report.
In a report on the 22nd of August, Ghosh said, “At SBI, we have developed an Artificial Neural Network (ANN) model with 30 high-frequency indicators. On the basis of the ANN model, we forecast that the quarterly GDP growth for the Q1FY24 (April-June 2023) would be at 8.3 percent.”
The SBI Research report has predicted a higher GDP growth rate as compared to other predictions made by national and International Economic agencies. Ghosh asserted that the GDP growth for FY24 will exceed the 6.5 per cent forecast given by the Reserve Bank of India (RBI). He predicted that the growth in FY2023-24 as a whole would stand at 6.7 percent.
