Home / Markets / Stock Markets /  India government bond inclusion in FTSE Russell index pushed back to next year

Global index provider FTSE Russell said India will remain on the watch list for inclusion in the FTSE Emerging Markets Government Bond Index (EMGBI), dashing market hopes that FTSE would announce its entrance into the index. India will be reassessed in March 2023, the index provider said.  But India will remain on the watch list for a potential upgrade to Market Accessibility Level 1, the index provider said on Thursday, which indicates an improved ease of foreign access to local markets.

"FTSE Russell continues to engage with its index users and Indian market authorities regarding ongoing market structure reforms, with a focus on securities that are available via the Fully Accessible Route channel," it said in its annual country classification review.

India had removed foreign investment restrictions on those government securities in 2020 as part of an effort to enter global bond indices, but its stance on other issues including capital gains taxes and local settlement have hampered its inclusion.

“Feedback from global index users continues to demonstrate an interest in Indian government securities issued through the Fully Accessible Route (FAR), which was introduced in 2020. The FAR originally removed foreign ownership restrictions for new issuance of Indian local currency fixed-rate government securities at the 5-, 10-, and 30-year tenors. On 06 July 2022, the Reserve Bank of India (RBI) announced the expansion of the FAR scheme to include all new issuance of 7- and 14-year tenors," FTSE Russel said. 

“FTSE Russell will continue its constructive dialogue with the Reserve Bank of India (RBI) and acknowledges the ongoing commitment to the evolution of the market by local policy makers. FTSE Russell will continue to seek additional feedback from market participants on their practical experiences of the ongoing reform efforts," the index provider said.

Reuters reported this week that India's entry into JPMorgan's influential emerging market debt index is set to be pushed into next year because of a number of issues New Delhi needs to address.

"Though the country didn't get added to the EMGBI, we expect the reaction in the G-Sec to be modest today as the AUM following EMGBI is small. The more consequential index decision would be JPM's (JPMorgan) announcement," DBS Bank said in a note. (With Reuters Inputs)



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