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Govt plans fresh bonds as it seeks India's inclusion in global indexes

The government plans to increase investment limit of foreign portfolio investors. File photo of finance minister Nirmala Sitharaman (PTI)Premium
The government plans to increase investment limit of foreign portfolio investors. File photo of finance minister Nirmala Sitharaman (PTI)

  • Getting added into global indexes could lure more foreign funds to supplement India’s waning local savings as Prime Minister Narendra Modi sets his sights on doubling the size of the economy

India will sell a fresh set of bonds to overseas investors as it seeks to lift investment limits on certain securities as part of efforts to get local notes listed on global bond indexes, the country’s chief economic adviser said.

Removing investment limits on specific sovereign bonds will be the first “necessary step" for the inclusion and the nation’s administration aims to fulfill other conditions in the fiscal year beginning April 1, Krishnamurthy Subramanian, told Bloomberg News in an interview in New Delhi on Monday. India may issue notes worth $5 billion with no caps on foreign investment, Reuters had reported last week, citing finance ministry officials it didn’t identify.

Finance Minister Nirmala Sitharaman announced the plan to remove the limits in her budget speech on February 1 as the government tries to push through a record borrowing plan of 7.8 trillion ($109 billion) to fund a wider-than-estimated fiscal deficit. Getting added into global indexes could lure more foreign funds to supplement India’s waning local savings as Prime Minister Narendra Modi sets his sights on doubling the size of the economy.

Sovereign bonds have rallied since the announcement of new bonds, with yields on benchmark 10-year notes dropping by 14 basis points to 6.46% on Tuesday. The central bank’s decision to conduct long-term repo operations also contributed to the gains.

“There are trillions of dollars that passively track these indexes, and even a small amount of weightage that Indian bonds get in them will bring in an entire supply of capital," said Subramanian.

The idea of tapping the global debt market more aggressively was floated last September when Modi was in New York. Bloomberg LP, the parent company of Bloomberg News and Bloomberg Barclays Indices, announced it would help Indian authorities navigate a course to inclusion in international bond benchmarks.

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

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